China HRC inventories expanded 4.59% on the week to 3.27 million mt

SHANGHAI, Jan 15 (SMM)—Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China continued to rise significantly this week amid high output and weakening demand.

SMM data showed that HRC stocks across social warehouses and steel makers expanded 143,300 mt or 4.59% from the previous week, and 35.52% on the year, to 3.27 million mt in the week ended January 14.

Inventories across social warehouses increased 66,900 mt or 3.21% week on week to 2.15 million mt. This was 37.73% higher than the same period last year. HRC social inventories extended gains this week, but the rise narrowed compared with the previous week. Trades in the spot market were tepid this week, and a resurgence of COVID-19 cases in Hebei province resulted in lock downs, which slowed shipments of steel products into social warehouses.

Stocks at Chinese steel makers came in at 1.12 million mt, up 76,400 mt or 7.35% week on week and 31.45% year on year. The buildup of HRC inventories at steel mills accelerated this week due to poor sales and transport restrictions.

China’s output of hot-rolled coils and plates is likely to expand significantly in January, as steel makers complete maintenance of blast furnace and rolling lines and as decent profits encourage mills to ramp up production. An SMM survey showed that 35 steel makers in China plan to produce a total of 10.69 million mt of hot-rolled coils and plates in January, up 2.7% from the realised output in December. Rising supply and shrinking demand will further accelerate HRC inventory buildup in the near term.