SHANGHAI, Sep 10 (SMM) — China's output of hot-rolled coils and plates is likely to remain high in September, as steelmakers recover from maintenance and high profits encourage mills to produce.

An SMM survey showed that 35 steelmakers in China plan to produce a total of 10.46 million mt of hot-rolled coils and plates in September, up 0.3% from the actual output in August.

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

The strong recovery in the past few months led to limited upside room in domestic manufacturing, while an increase in overseas demand and high export prices amid recovery from COVID-19 pandemic will encourage Chinese HRC producers to produce more material for the overseas market this month, according to the SMM survey.

The output of hot-rolled coils and plates for domestic sales will shrink 0.4%, or 40,600 mt from the month before to 10.15 million mt in September, while that for export will expand 33.6%, or 77,000 mt to 306,000 mt.

Output from North, East and South Central China increased slightly, while output from West China saw a slight decrease.

Planned output of hot-rolled coils and plates by region

China’s output of hot-rolled coils and plates in September is likely to remain high as the high profits encourage the production of steelmakers. Also, the hot coil rolling lines are almost in full production, leading to limited upside room of rolling lines this month. Meanwhile, steelmakers completed the maintenance in the traditional low season of July and August.

Profits of hot-rolled coils and plates and rebars

Updates on maintenance at Chinese HRC producers for August

On the supply side, it is likely that supply will be ample in September. On the demand side, the direct export of plates will gradually improve amid overseas economic recovery. The indirect export volume of home appliances and auto parts will also increase significantly from the previous months, and the demand for cold rolling will surge, leading to an increase in the demand for hot-rolled coils. The demand for construction machinery and heavy trucks in related industries will be driven with the recovery of long steels demand, boosting the demand for hot-rolled coils accordingly.

High supply and demand of HRC are likely to happen in September. Combined with the current low inventories and strong support from the cost side, HRC spot prices are unlikely to fall sharply in the near term. Therefore, it is expected that after this round of panic sentiment, HRC spot prices are likely to rebound under the support of the pre-holiday restocking.