SHANGHAI, Jan 22 (SMM)—Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China extended gains this week amid high output across major steel makers and weakening downstream demand.

SMM data showed that HRC stocks across social warehouses and steel makers rose 148,200 mt or 4.54% from the previous week, and 38.6% on the year, to 3.41 million mt in the week ended January 21.

Inventories across social warehouses increased 26,700 mt or 1.24% week on week to 2.18 million mt. This was 33.36% higher than the same period last year. HRC stocks piled up at Caifeidian and Jingtang ports as a resurgence of COVID-19 cases in Hebei triggered transport restrictions. As of January 21, HRC stocks stood at 250,000 mt at Caofeidian port and 150,000 mt at Jingtang port. This part of the port resources was not counted in the social inventories.

Stocks at Chinese steel makers came in at 1.24 million mt, up 121,600 mt or 10.89% week on week and 48.9% year on year. Rising output and affected transportation contributed to the rise in in-plant HRC inventories.

SMM learned that some downstream users have already suspended production for the Chinese New Year holiday, weighing demand for HRC. Meanwhile, as HRC stocks in north China are shipped to the south, social inventories will continue to rise, which will pressure spot HRC prices.