China hot-rolled product inventories increased to 3.51 million mt

SHANGHAI, Jun 4 (SMM)—Inventories of hot-rolled plate/coil totalled 3.51 million mt this week, up 24,400 mt or 0.7% mt from last week, but down 17.51% on the year.

The total inventory of hot-rolled products continued to accumulate slightly this week with the approaching of the off-peak season.

Inventories across social warehouses increased 32,900 mt or 1.3% week on week to 2.56 million mt. This was 16.2% lower than the same period last year. The stocks decreased in east and south China, but increased in north and south-west China, especially in the south-west regions where some end industries entered the off-peak season, and the demand for hot-rolled products declined.

Stocks at Chinese steel makers stood at 950,800 mt, down 8,500 mt or 0.98% week on week and 20.85% year on year. The overall stocks at steel makers declined due to the maintenance in some mills, and a plant in east China suspended many production lines under environmental protection control.

The fundamental supply and demand are expected to stay weak. The output of hot-rolled products is likley to drop in June and July due to more maintenance and regional production restrictions. On the demand side, the production and sales of automobile declined 9.3% and 10.8% respectively from the previous month, excavator sales fell 41.07% on the month, and the heavy truck sales dropped 17% on the month and 11% on the year. According to SMM survey, the overall prosperity of end enterprises remained high, but the new orders decreased. More automonile companies have reduced production due to the chip shortage, and the increase in medium and long-term orders for home appliance companies plummeted. The overall demand of hot-rolled products is trending lower in the medium term. In addition, the macro environment is weak as the government will stabilise prices and ensure supply. HRC prices are expected to remain fluctuating widely.