[SMM Analysis] Poor Downstream Demand Leads to Continuous Inventory Buildup of HRC in Ningbo

[SMM Analysis] Poor Downstream Demand Leads to Continuous Inventory Buildup of HRC in Ningbo

According to the SMM survey, the large-caliber inventory of SMM Ningbo HRC stood at 332,500 mt this week (as of January 21), up 6,000 mt WoW.

Futures prices declined first and then rose this week, while spot prices fell by 10 yuan/mt from last Friday, with trading performance ranging from moderate to weak during the week. As of the afternoon close on January 23, the most-traded HRC 2605 futures contract closed at 3,305 yuan/mt.

Meanwhile, according to the SMM survey, in the Ningbo spot trading market this week, in terms of prices, as of the afternoon of January 23, spot prices closed at 3,290-3,300 yuan/mt, down 20-30 yuan/mt from last Friday on a WoW basis. In terms of transactions, downstream just-in-time procurement dominated, with trading remaining in the doldrums and poor expectations for restocking before the holiday. Regarding arrivals, the pace of shipments for mainstream resources remained normal, and the arrival pace of DDH was also relatively stable. NG offered no discounts in January, and supply pressure rose MoM. Considering recent inventory levels, compared to Shanghai, Zhangjiagang, Lecong, and other places, inventory has accumulated for two consecutive weeks. Although the magnitude of accumulation is relatively small, the overall pressure is evident, and the trend aligns with previous forecasts. Looking ahead, under the supply increase and weak demand fundamentals, it is expected that the inventory of HRC in Ningbo will continue to accumulate, with the potential for the magnitude of accumulation to expand.

This week, SMM released the weekly balance data for HRC, showing a slight MoM decline in HRC production. According to SMM statistics, the social inventory of HRC across 86 warehouses (large sample) nationwide was 3.804 million mt this week, up 11,200 mt or 0.3% MoM and 22.91% YoY on the Gregorian calendar basis. This week, social inventory across the country accumulated slightly. By region, the regions with significant inventory buildup were still in the north, while east China, south China, and central China continued to experience destocking, although the magnitude of decline narrowed.

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