China: Mills’ HRC Stocks Hit Historical High Since CY15

Total stocks of hot-rolled coil (HRC) held by the 37 flat steelmakers across China which Mysteel surveys regularly climbed to 1.8 MnT over February 7-13, the highest level since May 2015 when Mysteel first introduced the mills’ stock survey. Respondents blamed the sustained bleak demand for hot coils and transport delays.

HRC stocks at the surveyed mills increased 229,700 MT or 14.7% on week, Mysteel’s latest survey showed, while over February 6-12 the inventories of hot coils held by traders in 33 major cities across China also gained by some 351,100 MT or 13.8% on week to 2.9 MnT, a new high since May 2017.

“Traders are under huge financial pressure currently, which is forcing them to concede a little on their offer prices in order to make more deals, but things have not gone well for them and very few transactions were concluded,” a Shanghai-based analyst said, adding that most steelmakers are offering discounts to their major trading agents.

The national average price for Q235 4.75mm HRC declined further by Yuan 77/MT ($11/MT) or 2.1% on week to reach Yuan 3,597/MT including the 13% VAT as of February 14.

“Unlike the demand for coils which remains dull, the resources at mills are sufficient,” a Shanghai-based steel trader told Mysteel Global. “For now, transport capacity remains low as many truck drivers have not returned to work but going forward, demand will recover so we’re hiring drivers for our truck fleet at the moment,” she said.

The Shanghai-based analyst agreed that currently, market conditions are poor, adding that among the downstream steel consumers which had already resumed operations, only a few had opted to stock up and that deliveries remain severely interrupted.

Given the lacklustre demand for steel and rising stocks, some steelmakers have opted to slow down production, as reported. HRC output among Mysteel’s 37 surveyed mills declined 60,600 MT or 1.8% on week to 3.3 MnT over February 6-13, Mysteel’s survey showed.

In parallel, the rolling capacity utilization rate of strip mills at those plants also slowed by 1.54 percentage points on week to 85.05% on average during the same period.