China HRC inventories continued their rapid falls this week

 SHANGHAI, Dec 10 (SMM)—Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China continued to fall rapidly this week, but the decline narrowed slightly compared with last week.

SMM data showed that HRC stocks across social warehouses and steel makers fell 139,500 mt or 4.48% on the week, but remained 25.35% higher than a year ago, to 2.98 million mt in the week ended December 10, after a 6.23% loss in the previous week.

Inventories across social warehouses dropped 186,500 mt or 8.57% week on week to 1.99 million mt. This was 26.97% higher than the same period last year. Strong end-user demand mainly contributed to the large decline in social inventories.

Stocks at Chinese steel makers came in at 985,500 mt, up 47,000 mt or 5.01% week on week and 22.19% year on year. Stable production  and long delivery period that slowed transfer of in-plant stocks to social warehouses led to the rise in inventories at steel mills.

An SMM survey showed that 35 steel makers in China plan to produce a total of 10.41 million mt of hot-rolled coils and plates in December, up 1.4% from the realised output in November. The output for domestic sales slid 1% month on month, while that for export surged 76.3%.

Although end-users currently produced at large losses due to high production costs, their demand for hot-rolled coils and plates is expected to remain stable in the near term as their orders were received previously.

HRC inventories are likely to continue to fall at a fast pace, and supply shortages may even occur if inventories hover at low levels constantly.

With strong support from fundamentals, HRC prices are expected to maintain its upward trend in the medium and long-term run.