China HRC output to edge lower in June as demand for CRC improves

SHANGHAI, Jun 10 (SMM) – China’s output of hot-rolled coils and plates is likely to be little changed in June, as the recovery from maintenance will be offset by new maintenance and switches back to cold-rolled products.

An SMM survey showed that 35 steelmakers in China plan to produce a total of 9.44 million mt of hot-rolled coils and plates in June, down 0.5% from the realised output in May.

Scheduled maintenance is estimated to take 494,000 mt of output offline in the whole month of June, far exceeding the 350,000 mt recovery from maintenance.

Mills, meanwhile, are switching back to CRC, as profits recovered and orders improved significantly on improved external demand for home appliances and domestic demand for automobiles.  

The output of hot-rolled coils and plates for export will continue to fall, standing at 162,500 mt for the month of June, as foreign demand has yet to recover from the Covid-19 pandemic. That will account for about 1.7% of China’s total output, down 0.9 percentage point from the month before.

For domestic sales , the output will expand to 9.27 million mt, which is unlikely to stop the uptrend in HRC spot prices in China as inventory pressure has eased and given the robust revival in end-users including construction machinery, heavy trucks and home appliances.

Compared to the same month of 2019, China’s output of hot-rolled coils and plates in June is estimated to be 500,000-600,000 mt lower. Inventories in the country, on the hand, are falling towards levels seen during the same period last year.

Positive fundamentals, coupled with optimism over the economic recovery from the pandemic, are expected to extend gains in HRC prices in June.