China HRC inventories extended declines this week, but supply to rise in the near future

SHANGHAI, Apr 16 (SMM)—China HRC stocks across social warehouses and steel makers continued to fall this week.

SMM data showed that HRC stocks shrank 162,700 mt or 4.52% from the previous week and 38.37% from a year earlier to 3.43 million mt in the week ended April 15.

Inventories across social warehouses declined 108,900 mt or 4.14% week on week to 2.52 million mt. This was 37.85% lower than the same period last year. The decline in HRC social inventories expanded this week as major traders sold spot cargoes at low prices as HRC futures prices trended lower and as end-user demand was moderate. 

Stocks at Chinese steel makers came in at 912,500 mt, down 53,800 mt or 5.57% week on week and 39.77% year on year. There were 5 steel mills undergoing maintenance this week, which resulted in the sharp decline in HRC in-plant inventories.

HRC output is likely to rebound significantly in the near term as several steel makers will recover from maintenance next week and some blast furnaces in Tangshan have restarted production, while demand is expected to be stable. It is worth noting that export tax rebate policy may be implemented, which will raise export costs by 600-700 yuan/mt. This may cause a small amount of export resources to return to domestic sales. Weaker fundamentals may weigh on HRC prices in the future.