China's HRC output recovers, prices hit 8-yr low

Production of hot-rolled coils (HRC) among the 37 Chinese flat steel producers Mysteel regularly monitors recovered to 3.1 million tonnes during the week of September 2-6, up by 54,300 tonnes or 1.78% on week, the results of the latest weekly production survey show. 

The hot-rolling capacity utilization rate among the 37 mills also rebounded by 1.39 percentage points on week to average 79.32% last week, the survey found. 

Some steel mills Southwest and North China had resumed hot coil production during the survey week after completing maintenance stoppages, resulting in the on-week rise in HRC output, survey respondents noted. 

Although September is usually a peak month for steel consumption in China, the recovery in steel demand after summer's lull including demand for hot coils has so far proven rather slow, sources noted. 

In contrast, both output and inventories of hot coils stayed at relatively high levels during the survey week, with the supply-demand mismatch dampening market confidence and causing buyers to generally adopt a cautious stance. 

As of September 5, HRC stocks held by the 37 surveyed mills that Mysteel follows had increased for a fourth straight week to reach 964,500 tonnes, albeit higher by just 0.73% on week. Meanwhile, inventories of the flat product at the commercial warehouses Mysteel monitors in 33 Chinese cities nationwide had also inched up by a 0.71% on week to 3.49 million tonnes. 

The cooler market mood also saw HRC prices steadily lose ground in both the spot and derivatives markets last week, Mysteel Global notes. By September 6, China's spot price of Q235 4.75mm HRC under Mysteel's assessment had decreased for seven successive days to Yuan 3,083/tonne ($433.71/t) including the VAT, down by Yuan 164/t or 5.05% on week and also reaching the lowest level since early November 2016. 

Similarly, the Shanghai Futures Exchange's most-traded HRC futures contract for January delivery also sank for eight consecutive trading days as of September 6, slipping by Yuan 243/t or 7.28% on week to close the daytime trading session at Yuan 3,096/t.