China HRC inventories started to fall amid lower output and higher demand

SHANGHAI, Mar 12 (SMM)—China HRC stocks across social warehouses and steel makers started to fall this week amid lower output and improving end-user demand, ending a nine-week winning streak.

SMM data showed that HRC stocks shrank 145,300 mt or 3.23% from the previous week and 17.6% from a year earlier to 4.36 million mt in the week ended March 11.

Inventories across social warehouses declined 105,700 mt or 3.26% week on week to 3.13 million mt. This was 6.63% lower than the same period last year. Demand for HRC rose sharply as end users have gradually returned to normal production. In addition, stricter transport restrictions in north China slowed shipments of in-plant inventories to social warehouses.

Stocks at Chinese steel makers came in at 1.22 million mt, down 39,600 mt or 3.14% week on week and 36.69% year on year. HRC output continued to fall this week amid stringent environmental restrictions, which led to the decline in in-plant inventories.

HRC inventories have started to fall this week, and the stock pressure is expected to ease significantly in the near term. Environmental restrictions will further strengthen against a backdrop of the carbon neutrality policy, and HRC output will decline, easing the supply pressure.  Meanwhile, demand for HRC is expected to improve as end users receive strong orders as global economies gradually recover. Improving fundamentals and shrinking inventories are likely to support spot HRC prices.