[SMM HRC Weekly Balance & Social Inventory Review] Post-Holiday Social Inventory Surges Significantly but Outperforms Historical Levels Overall

Ø  Weekly Balance of HRC

Ø  This Week's HRC Production Fluctuated at High Levels

Currently, steel mill production profitability remains moderate, with HRC production fluctuating at high levels in the first week after the holiday.

Ø  Significant Inventory Buildup of HRC in Social Warehouses This Week

This week, SMM statistics show that HRC social inventories in 86 warehouses nationwide (large sample) reached 3.8517 million mt, up 756,800 mt WoW (+24.45%) and down 25.03% YoY (lunar calendar). Social inventories across the country increased in the first week after the holiday, with larger buildups in east China, south China, and north China markets. Specifically:

l  [Shanghai] First Week After the Holiday! Shanghai HRC Inventory Below the Same Period in Previous Years

This week, Shanghai's HRC inventory stood at 349,100 mt, up 54,800 mt WoW (+18.62%), with a Gregorian YoY decline of 1.33% and a lunar YoY decline of 28.86%.

l  [Lecong] First Week After the Holiday, Lecong Inventory Significantly Increased but Better Than Last Year

This week, Lecong's HRC inventory reached 229,000 mt, up 48,000 mt WoW (+26.02%), with a lunar YoY decline of 9,400 mt (-1.07%).

l  [Zhangjiagang] First Week After the Holiday, Zhangjiagang Inventory Increased by Nearly 12%

This week, Zhangjiagang's HRC inventory stood at 451,000 mt, up 48,000 mt WoW (+11.91%), with a Gregorian YoY increase of 1.81% and a lunar YoY decline of 19.18%.  

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Before and after the Chinese New Year, steel mills maintained high production levels, with HRC production continuing to increase. During the holiday, the spot market saw almost no transactions, leading to some inventory buildup in social warehouses. However, overall, the post-holiday inventory buildup in mainstream markets was better than in the same period in previous years. Looking ahead, steel mills remain highly motivated to produce, resulting in significant supply pressure for HRC. End-users have yet to fully resume operations, and demand recovery may be delayed. The supply-demand imbalance may lead to continued inventory buildup in social warehouses nationwide in the short term.