China HRC Inventory Down 60,600 mt on Week

SHANGHAI, Aug 6 (SMM) - SMM data showed that HRC stocks across social warehouses and steel makers shrank 60,600 mt or 1.49% on the week, an increase of 1.97% than a year ago, to 4.0038 million mt in the week ended August 5.

Steel mills actively reduced inventories amid rebounding HRC output this week. The plants sold off stocks after the release of futures resources, and end users were restocking at low prices. HRC stocks started to decline after the increase in the past ten consecutive weeks.

Inventories across social warehouses decreased 31,000 mt or 1.01% week on week to 3.0407 million mt. This was 8.31% higher than the same period last year.

The steel mills’ selling off stimulated the downstream demand for HRC restocking. Regional pandemic broke out in China this week, impeding the transportation, and the arrivals at some social warehouses declined, which resulted in the decrease in social inventories.

Stocks at Chinese steel makers came in at 0.9631 million mt, down 29,600 mt or 2.98% week on week and 14.46% year on year.

AYGT and SG resumed production from the maintenance this week, and the output rebounded, bringing higher pressure on the in-plant stocks. However, most steel mills in north China actively delivered stocks to social warehouses, and the total stocks at plants decreased.

On the supply side, as of August 4, SMM HRC profit was 937 yuan/mt, and most steel mills mainly produced HRC for high profits. Some steel mills have delayed the August maintenance plan, and the HRC output is expected to stay stable or increase slightly on the month in August.

The demand in early August may stay low due to the pandemic, but the end demand of restocking may burst in early September when the pandemic is appeased. Then the total HRC inventory is expected to enter a downward period and support the prices at high levels.