China HRC inventories extended decrease at slower pace on week

SHANGHAI, Nov 5 (SMM) – Inventories of hot-rolled coils (HRC) and plates used in automobiles and home appliances continued to fall this week as some steel mills resumed production from maintenance amid stable downstream demand. The decline has narrowed.

SMM data showed that HRC stocks across social warehouses and steelmakers declined 2.4% in the week ended November 5 to 3.73 million mt. The stocks were 30% higher than the same period last year.

Inventories across social warehouses fell 2.87% on the week to 2.7 million mt. This was 36.8% higher than the same period last year.

Recently, the market sentiment continues to improve due to the rising coke prices. Active downstream end-user purchases lead to the continuous decline in the social stocks this week, and the speed of decline is relatively stable in recent weeks.

HRC stocks at steelmakers shrank 2.77% week on week, but rose 14.9% year on year, to 1.02 million mt this week.

Recently, the rolling lines of steel mills gradually resumed production from maintenance, and the HRC output increased. At the same time, the delivery volume of steel mills remained normal, and the steel mills that are receiving orders on a daily basis have yet to increase their volume, so the overall speed of depletion of in-plant stocks remained unchanged. Therefore, with the increase of output, the decline of in-plant stocks has narrowed this week.

HRC inventories have declined further since mid-October, significantly boosting market confidence and supporting the spot prices of HRC.

On the supply side, although the maintenance of steel mills is reduced compared with the previous period, the output is expected to rebound. However, according to the current operating rates of blast furnaces (operating rates of blast furnaces according to SMM data this week stand at 88.5%, which is already at a high level) and the extent of Tangshan's environmental protection and limited production, the output recovery space is narrow, and the increment of supply side is limited.

On the demand side, driven by the sales of automobiles and household appliances at the end of the year and the continued strong demand of the hardware industry, it is expected that the current high demand will continue. The overall fundamentals of HRC have not shown signs of significantly weakening, and it is expected that the spot prices will still be in robust trade in the near term, with the support of continuous stock reduction.