China HRC inventories extended increased by 1.3% on week

SHANGHAI, Aug 7 (SMM) – China’s inventories of hot-rolled coils and sheets which are used to produce home appliances and cars continued to trend higher this week.

SMM data showed that HRC stocks across social warehouses and steelmakers increased 1.29% in the week ended August 6 to 3.93 million mt, after a 0.72% gain in the previous week. The stocks were 12.58% higher than the same period last year.

HRC social inventories rose 1.68% this week to 2.81 million mt, marking the seventh consecutive week of gains. Impact of the rainy season on HRC transportation weakened, smoothing shipments from steelmakers to social warehouses. In addition, sharply-rebounded HRC prices improved market sentiment and speculative demand, accelerating transfer of cargoes to social warehouses, and this, coupled with stable end-user demand, drove up social inventories.

Although sales at some steelmakers improved, increasing HRC output lifted in-plant stocks by 0.34% this week to 1.13 million mt, after a 1.31% decline in the week before.

Although output of hot-rolled coils has been on the rise since July and August, the pressure on market inventory has yet to be felt in the short term. Steel mills and traders have indicated that the current inventory situation is relatively eased. Widening price spreads between different regions has caused a significant increase in shipments from north China to east China recently. Costs support, shortage of some specifications and investors’ optimism on ferrous metals prices will support spot HRC prices.