China HRC inventories extended declines this week

SHANGHAI, Nov 26 (SMM)—Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China continued to shrink this week, and the decline expanded slightly compared with the previous week as steel makers kept stable production while end-user demand was strong.

SMM data showed that HRC stocks across social warehouses and steel makers fell 126,400 mt or 3.67% on the week, but remained 31.65% higher than a year ago, to 3.32 million mt in the week ended November 26, after a 3.08% loss in the previous week.

Inventories across social warehouses dropped 113,800 mt or 4.7% week on week to 2.31 million mt. This was 32.91% higher than the same period last year. HRC futures prices fluctuated at high levels this week, which dampened end-users’ enthusiasm for purchasing. But production at end-users remained robust currently, which contributed to the rapid fall in HRC social inventories.

Stocks at Chinese steel makers came in at 1.02 million mt, down 12,600 mt or 1.23% week on week, but rose 28.88% year on year. Output at steel makers did not rise significantly this week, and some steel mills in north China increased shipments after the effect of rain and snow faded.

HRC inventories are likely to extend declines in the near term as its strong demand is likely to extend to at least the end of 2020 due to robust orders at steel makers. However, HRC prices have already climbed to a high level, and weaker rebar prices may drag on HRC prices.