SHANGHAI, Aug 12 (SMM) — China’s output of hot-rolled coils and plates is likely to rise sharply in August, as steelmakers recover from maintenance and increasing spot HRC prices encourage mills to produce.

An SMM survey showed that 35 steelmakers in China plan to produce a total of 10.42 million mt of hot-rolled coils and plates in August, up 6.6% from the realised output in July.

China's monthly output of hot-rolled coils and plates (planned production)

A pick-up in domestic demand and decent profits encourages Chinese HRC producers to pour more cargoes into the domestic market this month, while Covid-19 pandemic overseas and low export prices will extend the decline in the output for export, according to the SMM survey. 

The output of hot-rolled coils and plates for domestic sales will expand 6.9%, or 661,700 mt from the month before to 10.19 million mt in August, while that for export will shrink 6.6%, or 16,000 mt to 228,000 mt.

Planned output of hot-rolled coils and plates by region

Output from North and South Central China to increase sharply, while gains in the east and west are moderate.

North China: Planned output of hot-rolled coils and plates=5.34 million mt, +513,700 mt/10.64%; exports=74,000 mt, -16,000 mt/17.78%

East China: Planned output of hot-rolled coils and plates=2.82 million mt, +3,000 mt/0.11%; exports=154,000 mt, barely changed

South Central China: Planned output of hot-rolled coils and plates=1.88 million mt, +115,000 mt/6.53%; No exports

West China: Planned output of hot-rolled coils and plates=382,000 mt, +14,000 mt/3.8%; No exports

The recovery from maintenance is estimated to bring about 390,000 mt of hot-rolled coils and plates output back online this month, while new maintenance will affect 130,000 mt. That leads to an increase of 260,000 mt in output. In addition, profit-driven full-capacity operating is expected to bring another increase of about 280,000 mt in output.  

Profits of hot-rolled coils and plates 

The possible sharp increase in output and a traditional low season for manufacturing will weaken the fundamentals for HRC. However, robust orders and low market inventories prompt steelmakers and traders to hold prices firm. HRC spot prices will on an upward trend in August.