The inventories of hot-rolled coil (HRC) held by both steelmakers and traders across China have witnessed significant rises since the Chinese New Year holiday (January 24-February 2), Mysteel Global has learned. The resumption of trading of coils was interrupted while mills continued to operate normally, with the result that prices have declined considerably.
As of February 5, HRC stocks at Mysteel’s 37 regularly surveyed flat steelmakers hit a historical high since May 2015 to touch some 1.6 million tonnes, up by 646,300 tonnes from the inventory total as of January 22, Mysteel’s survey showed.
“The production of most steelmakers stayed as per normal during the holiday, but steel deliveries were impacted, especially those transported by road, and the unloading of products at the port is also slowing down,” a Shanghai-based market watcher said. “Consequently, the warehouses at many mills are full and makers have had to transfer some stocks to off-site warehouses,” he added.
HRC production at the surveyed mills stayed high at 3.4 million tonnes over January 30-February 5 – only some 21,700 tonnes lower on week – while the rolling capacity utilization rate inched down only 0.56 percentage points on the week to 86.59% on average, Mysteel’s data showed.
The stocks held by traders in China’s 33 major cities monitored by Mysteel have also reached a four-month high, increasing by 476,000 tonnes from those accumulated during January 17-22 to 2.5 million tonnes as of February 6, the survey showed.
The remarkable rise in stocks and bleak demand due to the outbreak of Novel Coronavirus Pneumonia (NCP) had resulted in sharp declines in HRC prices, with Mysteel’s national average price for Q235 4.75mm HRC dropping Yuan 165/tonne ($23.6/t) from that on January 23 to reach Yuan 3,674/t including the 13% VAT as of February 7.
“Most downstream consumers opted to delay resuming operations to ensure worker safety, which largely dampened demand,” the analyst stated, adding that some traders were yet to reopen for business too.
An official from an automaker in Northeast China told Mysteel Global that their factories remained on holiday and when production might resume was still unclear.
~This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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