[SMM Analysis] Demand Recovery Slow; Ningbo Inventory Continued to Accumulate

[SMM Analysis] Demand Recovery Slow; Ningbo Inventory Continued to Accumulate

According to the SMM survey, the SMM Ningbo HRC large-port statistical inventory stood at 383,500 mt as of September 17, up 4,000 mt WoW.

This week, HRC prices first rose then fell, with spot prices fluctuating rangebound by 10-20 yuan/mt WoW. Trading atmosphere was moderate during the week, with end-users purchasing as needed and showing relatively low restocking willingness. As of the afternoon close on September 19, the most-traded HRC 2601 futures contract settled at 3,374 yuan/mt.

Meanwhile, according to the SMM survey, at the Ningbo spot trading market this week, transaction prices of mainstream HRC resources edged up. As of the afternoon of September 19, spot offers were at 3,410-3,420 yuan/mt, up 10 yuan/mt from 3,410 yuan/mt last Friday. Trading was mixed during the week: transactions at low prices were moderate in the first half of the week when prices surged significantly, while sentiment pulled back markedly in the latter half with poor transactions. In terms of arrivals, shipment pace of mainstream resources remained stable, and supply fluctuated rangebound WoW. Inventory side, Ningbo HRC inventory saw a slight buildup this week. End-use demand recovered poorly and slowly, far below market expectations, so overall inventory continued to accumulate and gradually approached the level of the same period last year. Looking ahead, downstream consumption of HRC in Ningbo remains relatively low. Although the National Day holiday is approaching, some restocking demand is expected to be released, but the improvement is likely to be relatively small. Considering that current inventory is already at a high level, Ningbo inventory is expected to fluctuate rangebound next week with limited upside and downside.

This week, SMM released its weekly HRC balance data. Affected by maintenance, HRC production at some steel mills in central and south China declined slightly MoM. This week, HRC social inventory in 86 warehouses nationwide (large sample) tracked by SMM totaled 3.7104 million mt, up 69,700 mt or 1.91% WoW, and down 18.56% YoY. National social inventory accumulated significantly this week. By region, inventory built up in all regions except northeast and east China, which saw slight declines.

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