SHANGHAI, Dec 24 (SMM)—Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China extended declines this week, and the decline expanded slightly compared with the prior week.
SMM data showed that HRC stocks across social warehouses and steel makers fell 85,500 mt or 2.9% on the week, but remained 18.64% higher than a year ago, to 2.86 million mt in the week ended December 24.
Inventories across social warehouses dropped 14,500 mt or 0.75% week on week to 1.91 million mt. This was 22.54% higher than the same period last year. HRC social inventories held relatively stable this week. Steel makers in some regions recently put more HRC into the market, while stocks that piled up at ports in east China have been gradually shipped to social warehouses. HRC futures prices soared earlier this week, prompting end users to slow procurements.
Stocks at Chinese steel makers came in at 946,700 mt, down 71,000 mt or 6.98% week on week but up 11.47% year on year. Steel makers who fixed prices last week received robust orders after HRC futures prices surged earlier this week. In addition, orders directly from end users and export orders were strong as well. These contributed to the sharp fall in in-plant HRC stocks this week.
HRC futures prices soared to an all-time high on Tuesday December 22 before trending lower later in the week as a new highly infectious Covid-19 variant in Britain triggered lockdowns in London and many countries shut their borders to the UK, stoking worries about the post-pandemic economic recovery. In terms of fundamentals, demand and supply remained in tight balance, and total inventories are expected to extend declines in the near future.
Cargoes will be put into the market after delivery of the SHFE 2101 HRC contract in late January 2021, while demand is expected to weaken as the upcoming Chinese New Year holiday and high production costs are likely to lower operating rates at end users.
