China HRC inventory rose 2.08% on week

SHANGHAI, Jul 2 (SMM) — SMM data showed that HRC stocks across social warehouses and steel makers rose 80,200 mt or 2.08% on the week, an increase of 10.34% than a year ago, to 3.94 million mt in the week ended July 1.

The supply and demand weakened in north China before the 100th anniversary of the founding of CPC. Overall domestic trade was flat in the off-peak season, and the total HRC inventories kept rising.

Inventories across social warehouses increased 68,600 mt or 2.45% week on week to 2.87 million mt. This was 13.61% higher than the same period last year.

The increase in social inventories narrowed as the output of the plants in north China dropped sharply, and the road and port transportation of steel was impeded. In addition, HRC prices continued to rise this week, and spot trade picked up slightly, and the pressure on the stockpile eased.

Stocks at Chinese steel makers came in at 1.07 million mt, up 11,600 mt or 2.08% week on week and 10.34% year on year.

The inventories delivered from steel mills to social warehouses were limited due to the 100th anniversary of the founding of CPC and fewer orders. The in-plant inventories increased slightly despite the markedly falling output.

Although the market has strong expectations of production restriction, steel mills in Tangshan and other regions will resume production on July 2 due to the actual demand, and the new production restriction plan has not yet been released.

The plants that reduced production under policy impact were mostly construction steel plants, as it was hard for them to profit.

According to the calculation of SMM cost model, the hot rolling plants in east China had a profit of 252.6 yuan/mt as of July 1, and the steel plants were more enthusiastic in production. At the same time, considering the weak profit and demand of construction materials, cold-rolled and galvanised products were also faced with greater shipping pressure, and HRC output may increase due to the switched production from molten iron.

Although steel mills had to reduce production under the policies, they still ensured the HRC supply, so the decline of HRC output was slighter than the market expectation.

According to SMM preliminary survey, domestic hot rolling steel mills will increase production in July, while the HRC demand is expected to remain low in the off-peak season. HRC prices will have limited upward room, and is expected to keep fluctuating.