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[SMM thread] if Hangzhou warehouse wants to charge additional storage fee, what is the impact of the spot market?
Jul 22,2020 18:56CST
The content below was translated by Tencent automatically for reference.


This week Hangzhou thread inventory 1.078 million tons, month-on-month-7000 tons, year-on-year + 377000 tons. Recently, the high level shock of thread inventory in Hangzhou has not been accumulated continuously. the main reason is that Jiangsu, Anhui and other places are seriously affected by floods, shipping and automobile transportation are limited to a certain extent, and the shipments of local resources to Hangzhou have decreased. Secondly, Hangzhou inventory is close to the peak storage capacity, superimposed by the impact of the rainy season, port ships are inconvenient to unload, due to inventory pressure, some steel mills, such as Yonggang, have reduced shipments to Hangzhou. Finally, the plum gradually emerged from Hangzhou and its surrounding areas this week, and market traders said that terminal demand showed obvious signs of recovery, although it had not yet reached the level of prosperity, but it had made a certain contribution to the elimination of inventory in Hangzhou.

Figure 1: the trend of thread inventory in Hangzhou

Source: SMM Steel

Hangzhou thread inventory high has become the market "normal", the current spot prices continue to rise with the market, plum dawn will appear, market sentiment is gradually active, we gradually put aside high inventory "prejudices" and actively participate in the market torrent. However, the warehouse said it was "unable to bear it". Today, Hangzhou Dongchang Kou has issued a notice to charge more storage fees in view of the problem of full storage capacity:

Hangzhou inventory high shock, the warehouse move "crackdown" inventory has spread throughout the Hangzhou steel trade circle, will this be a blow to Hangzhou market prices?

According to SMM, the warehouse that issued the notice is Dongchang Depot, Yuhang District, Hangzhou, and the storage reserves of this terminal are smaller than those of Hangzhou sublimation, Renhe and Chongxian warehouses. Although there is some pressure on the circulation of goods in major warehouses in Hangzhou, it is unlikely to follow policies such as controlling storage volume and charging more storage fees, and the market does not have to over-interpret it.

The spot price of Hangzhou thread continues to rise driven by the period screw, but the transaction condition has not been ideal under the influence of the rainy season, making it difficult for inventory to be effectively removed. In the short term, now the haze of Meiyu is gradually fading, and steel mills in areas where shipping and land transportation are limited may be forced to ship again to Hangzhou, bringing supply pressure. However, on the demand side, due to the long rainy season this year, the construction of construction sites in East China has been restricted for a long time, and the outbreak of terminal demand after the weather improves is a high probability event. It is expected that there will be a significant pick-up around August, bringing new "vitality" to Hangzhou inventories and supporting spot prices to strengthen.

For queries, please contact Frank LIU at liuxiaolei@smm.cn

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