China’s domestic flat steelmakers seem unlikely to lower their production of hot rolled coils, even though their margins currently are only average, industry watchers suggest. HRC prices have been firm during the past few weeks, but traders are hesitating procuring products for January delivery fearing a correction is looming.
HRC production among the 37 flat steelmakers Mysteel regularly surveys increased for a second successive week over November 22-28, rising by another 1.1% on week to 3.3 million tonnes, Mysteel’s database showed. Meanwhile, the rolling capacity utilization rate among those mills averaged 85.2% over the same period, representing an increase of 0.93 percentage point on week,
Mysteel’s national average price for Q235 3mm HRC moved up for a fifth straight week to reach Yuan 3,868/tonne ($550/t) including the 13% VAT as of November 29, gaining another Yuan 35/t on week.
“The domestic flat steelmakers are securing profits of some Yuan 200-300/t on average these days so they are unlikely to ease back on production,” a Shanghai-based steel analyst said. “For now, traders don’t feel much sales pressure, given the extremely low level of stocks and rather active trading, especially when coils in a few widths and specifications are still in short supply,” he stated. Demand in South and East China remains rather stable though that in North and Northeast China is showing signs of weakness, he added.
The volume of hot coils in inventory among traders in China’s 33 cities equalled 1.8 million tonnes as of November 28, down by another 1.1% on week or some 13% lower on year, while the stocks of HRC at the 37 mills Mysteel checks had declined by a large 5.1% on week or 19.3% on year to 765,900 tonnes as of November 27.
“Now many traders are very cautious about purchasing hot coil for January delivery as they believe that prices will soon be dragged down by the high levels of supply and the slight decline in demand,” the analyst said, adding that some are waiting for a significant price correction that will see prices decline markedly, in order to stock up for sales after the upcoming Chinese New Year holiday (January 24-30).
This article has been published under article exchange agreement between Mysteel Global and SteelMint.
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