Production of hot-rolled coils (HRC) among the 37 Chinese steelmakers regularly surveyed by Mysteel retreated further during November 6-12, easing by 1.4% on week to 3.14 million tonnes, the latest survey results showed.
During the week, the HRC rolling capacity utilization rate among these sampled mills declined by 1.15 percentage point on week to stand at 80.13%, while the operational rate decreased by 1.57 percentage point to 76.56%, the results indicated.
Worsening profit margins on their sales of the flat steel last week compelled more steel mills to halt production and commence overhauls and causing HRC output to slide further last week, a trend that is likely to persist well into December to ease the supply pressure.
On the other hand, despite the recent fall in HRC output, hot coil inventories held by steel mills and sitting at traders' warehouses remain elevated.
By November 13, HRC stocks at the 194 commercial warehouses in the 55 Chinese cities Mysteel monitors stood at 4.49 million tonnes, unchanged from the prior week's level, while stocks at steel mills inched up by 900 tonnes or 0.12% on week to 775,200 tonnes.
Weakening end-user demand and the high stock levels at steel mills and warehouses continued to weigh on HRC prices. On November 14, Mysteel assessed the national price of Q235 4.75mm HRC at Yuan 3,304/tonne ($465/t) including the 13% VAT, down by Yuan 6/t or 0.18% on week.
The same day, the most-traded HRC contract for January delivery on the Shanghai Futures Exchange ended the daytime trading session at Yuan 3,256/t, lower by Yuan 11/t or 0.34% from the settlement price a week earlier, the bourse's data showed.
Going forward, the key point to watch is the extent to which steel mills control their production, a Shanghai-based analyst pointed out, noting that the recent fall in the pace of production was unlikely to be sufficient to resolve the supply-demand imbalance by December.
Source:Mysteel Global