China HRC inventories increased 345,400 mt to 4.45 million mt this week

SHANGHAI, Feb 25 (SMM)—China HRC stocks across social warehouses and steel makers extended gains this week as steel mills kept normal production while end-user demand has yet to recover completely.

SMM data showed that HRC stocks expanded 345,400 mt or 8.42% from the previous week, and 8.57% from a year earlier, to 4.45 million mt in the week ended February 25.

Inventories across social warehouses rose 455,800 mt or 16.98% week on week to 3.14 million mt. This was 23.78% higher than the same period last year. Although trades have improved recently amid rising HRC prices, end user demand was tepid. Besides, the transfer of in-plant inventories into social warehouses also led to the rise social inventories.

Stocks at Chinese steel makers came in at 1.31 million mt, down 110,400 mt or 7.77% week on week and 16.14% year on year. The recovery of transportation after the Chinese New Year holiday accelerated the transfer of in-plant inventories to social warehouses.

HRC social inventories have been building up for two consecutive weeks, posting greater supply pressure. However, social inventories are mostly concentrated in the hands of large investors with strong financial strength, and their ability to resist inventory pressure is relatively strong. HRC output is likely to drop from highs in March due to more maintenance and stricter environmental restrictions, which will ease the supply pressure. In addition, demand for HRC is increasing as operating rates at downstream users are rising.