China HRC inventories extended declines of 30,500 mt this week

SHANGHAI, Dec 17 (SMM)—Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China continued to fall this week, but the decline narrowed significantly compared with last week.

SMM data showed that HRC stocks across social warehouses and steel makers fell 30,500 mt or 1.02% on the week, but remained 24.68% higher than a year ago, to 2.95 million mt in the week ended December 17, after a 4.48% loss in the previous week.

Inventories across social warehouses dropped 62,700 mt or 3.15% week on week to 1.93 million mt. This was 23.26% higher than the same period last year. HRC futures continued to climb this week, but spot prices failed to follow higher. High prices kept end-users extremely cautious and drove them to cut procurements.

Stocks at Chinese steel makers came in at 1.02 million mt, up 32,200 mt or 3.27% week on week and 27.47% year on year. Stable production at steel makers and fewer orders from buyers slowed stock transfer from steel mills to social warehouses.

Rising raw materials prices narrowed profits at end-users and prompted them to slow feedstock procurement. Demand is likely to be weak in the near term. Nevertheless, HRC’s fundamentals remained sound, and spot prices are likely to maintain the upward trend in the long run, but in the short term, weaker end-user demand may weigh on spot HRC prices.