China HRC inventory rose 97,900 mt on week

SHANGHAI, Jun 10 (SMM)—SMM data showed that HRC stocks across social warehouses and steel makers rose 97,900 mt or 2.79% on the week, but down 11.67% than a year ago, to 3.61 million mt in the week ended June 10. The total HRC inventory has risen for the third consecutive week, with wider increase on the week. 

Inventories across social warehouses increased 24,100 mt or 0.94% week on week to 2.58 million mt. This was 11.17% lower than the same period last year.

Steel mills were transferring stocks to social warehouses under pressure. At the same time, the market wait-and-see sentiment has gradually increased amid the widely fluctuating HRC prices, and the overall demand for HRC declined in the off-peak season, leading to higher social inventories.

Stocks at Chinese steel makers came in at 1.02 million mt, up 73,800 mt or 7.76% week on week but down 12.91% year on year.

Steel mills were receiving fewer orders in the off-peak season, leading to the higher inventories at mills. What's more, the demand of cold-rolled products and galvanising products declined significantly, prompting some steel mills to switch the production to hot rolling, which further weighed on the supply.

At the macro level, China’s May PPI data saw an unexpected growth. Domestic government may take further measures to stabilise commodity prices and ensure the supply.

In terms of fundamentals, steel mills’ hot-rolling production profits remained high, and output is likely to stand high as well. At the same time, the supply pressure on hot-rolled products may be intensified as the export resources will return and some steel mills switch cold-rolling lines to hot-rolling production.

On the demand side, the end production and sales and the spot transaction were quiet in the off-peak season.

HRC prices are likely to remain between 5,000-5,500 yuan/mt with insufficient upward momentum.