China HRC inventories extended decline as mills trimmed output

SHANGHAI, Mar 26 (SMM) – Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China fell for a second straight this week, as mills conducted maintenance or shifted to rebar production.

SMM data showed that HRC stocks across social warehouses and steelmakers decreased 1.38% in the week ended March 26 to 5.27 million mt, 70.08% higher than the same period after the Lunar New Year holiday last year.

This week’s week-over-week decline was smaller than a 2.28% decline last week, the first weekly decline since the Lunar New Year holiday, as stocks at social warehouses inched up.

HRC social inventories in China edged up 0.03% this week to 4.06 million mt, after a 1.67% decline in the prior week, as the imposition of measures to contain the fast-spreading COVID-19 pandemic outside China dampens demand outlook, roiling futures market and sidelining buyers in the physical market.

Increased deliveries of cargoes that had been stranded at ports to social warehouses also helped stem a downtrend in HRC social inventories.

HRC stocks at Chinese steelmakers fell for a fifth straight week this week, decreasing 4.98% to 1.52 million mt, larger than a decline of 3.79% in the previous week.

Some mills scaled back production of HRC and increased production of construction steel rebar, as SMM calculations showed that profits on rebar are about 200 yuan/mt higher than those on HRC.

With external demand subdued by the coronavirus, April orders from end-users received by Chinese steelmakers appear pessimistic, which is likely to force mills to pour more cargoes in the domestic markets, weighing on spot HRC prices in China.