[SMM Analysis] Ningbo HRC Inventory Reaches Turning Point, Total Volume Declines Slowly

[SMM Analysis] Ningbo HRC Inventory Reaches Turning Point, Total Volume Declines Slowly

According to the SMM survey, the SMM Ningbo HRC broad-caliber inventory stood at 397,000 mt as of 10.22, down 13,000 mt WoW.

HRC prices edged up this week, with the spot price rising 10-40 yuan/mt WoW. Trading activity in the market improved during the week. As of the afternoon close on 10.24, the most-traded HRC 2601 futures contract settled at 3,250 yuan/mt.

Meanwhile, according to the SMM survey, in the Ningbo spot market this week, transaction prices for mainstream HRC resources increased slightly. As of the afternoon of 10.24, spot offers were at 3,300-3,310 yuan/mt, up 10-20 yuan/mt WoW from last Friday. In terms of transactions, sales volume increased compared to previous periods, but turnover noticeably weakened after sustained price hikes. On Friday, most traders chose to refuse to budge on prices, after which a clear deterioration in transactions was observed. Regarding arrivals, the shipment pace of mainstream resources remained normal. However, inventory is still building up in south China. Based on the latest SMM survey, inventory in south China is expected to remain high with fluctuations and difficult to destock smoothly, posing a potential risk of spillover to Ningbo. Nonetheless, pressure has eased somewhat as NG's fixed annual maintenance period approaches, so arrivals in November and December are expected to decrease significantly. In summary, the turning point for Ningbo's inventory has appeared, but the decline in the short term is not expected to be substantial. It will depend on specific arrivals and downstream digestion. The current recovery efficiency of downstream sectors remains relatively slow, and significant destocking is anticipated to become apparent in November.

This week, SMM released its weekly HRC balance data. HRC production decreased slightly MoM. The national HRC social inventory across 86 warehouses (large sample) surveyed by SMM totaled 4.3664 million mt, up 78,900 mt or 1.84% MoM, and up 12.7% YoY on a calendar basis. National social inventory continued to accumulate this week, but the pace of buildup narrowed further. By region, inventory saw a slight decline in east China and north-east China, while accumulation continued in north China, south China, and central China.

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