China HRC inventories started to increase

SHANGHAI, Sep 18 (SMM) - SMM data showed that inventories of hot-rolled coils (HRC) and plates across social warehouses and steelmakers, which are used in automobiles and home appliances, stood at 4.03 million mt in the week ended September 18, after a 2.21% increase in the previous week. The stocks were 21.8% higher than the same period last year.

HRC supply increased again this week, and the spot market was subject to the continuous decline of the futures. Sluggish trades and weak end-users restocking led to a rise of inventories.

SMM data showed that HRC stocks across social warehouses stood at 2.84 million mt this week, with a rise of 3.65% from the prior week, and up 21.5% from a year ago.

Overall spot market continued to be weak this week, and traders quotations were lower with poor shipment situation. HRC destocking rate has slowed down significantly. In addition, fewer cargoes piled up at ports in some areas, accelerating shipments to social warehouses. That also accounted for the slight decline of HRC stocks across social warehouses this week.

In-plant HRC inventories decreased 0.87% week on week and advanced 22.4% year on year to 1.19 million mt in the week ended September 17, showed SMM data.

Although HRC output has increased ahead of the National Day holiday, and steelmakers tend to take the initiative to reduce inventories to prepare for the production during the National Day holidays. Steelmakers has accelerated the shipment recently, and the in-plant inventories gradually shifted to the social warehouse, resulting in a slight decrease of in-plant HRC inventories.

HRC supply remained at a high level with sluggish demand. In terms of futures, after experiencing a strong increase for five consecutive months, the costs and finished products have fallen amid lack of confidence in the market.

Futures are likely to enter a weak consolidation stage after the release of bearish sentiment in the near term, and the end-users demand waiting in the early stage is expected to be released after the futures stabilises. At the same time, as the National Day holiday approaches, the market and steelmakers tend to take the opportunity of pre-holiday end-users restocking to reduce inventories.

It is expected that HRC inventories will slow down its buildup in the near term.