After another month in which hot-rolled coil (HRC) prices in China recorded a steady though mild decline in February, domestic HRC prices are projected to firm to some degree this month as a consequence of recovering end-user demand and declining coil stocks at mills and in commercial warehouses, Mysteel's latest monthly report on the commodity suggests.

During February, HRC supply remained relatively ample as integrated mills kept their hot strip mills in operation during the nine-day Chinese New Year (CNY) holiday over February 15-23.  However, as most traders and coil buyers had shut their businesses during the holiday, HRC stocks held by steelmakers and traders steadily mounted.

By February 26, hot coil inventories in the 194 warehouses nationwide that Mysteel tracks had reached a record 4.9 million tonnes, the highest since September 20 2024. Similarly, stocks held by steelmakers in their dispatch sheds and yards had reached a one-year high of 947,800 tonnes as of the same day.

Strained by the elevated stocks and slow recovery in demand after the CNY break, prices of HRC also softened last week. On February 27, Mysteel assessed the average price of Q235 4.75mm HRC nationwide at Yuan 3,268/tonne ($474/t) including the VAT, lower by Yuan 31/t or 0.94% from end-January.

Entering March, HRC output was seen advancing as more integrated mills that had banked their blast furnaces during the CNY break were to bring them back online.

However, the latest Mysteel survey results released on March 5 showed that HRC output actually shrank by 85,000 tonnes or 2.7% on week to total 3.01 million tonnes over the week of February 26-March 4.  

On the demand side, restocking needs among manufacturing firms are expected to grow this month as most have returned to work after China's Lantern Festival on March 3. Market watchers suggest that this should cause HRC inventories to decrease gradually, improving HRC fundamentals as a result and adding some upside momentum to prices of the coils.

However, some downside risks for the market also exist.

China's General Administration of Customs traditionally combines January and February export data together as February statistics are usually skewed by the week-long Chinese New Year holiday break that usually occurs in one of the two months.

As of March 5, the GACC had yet to release steel export data for this year's January-February period but many analysts expect the total export volume to decline on year. This is partly due to last December's reintroduction by the central government of a steel export licensing system which took effect this January and has raised the compliance costs of low value-added goods such as hot coils.

In addition, the recent escalation of the Middle East tensions after US and Israel's strikes on Iran commenced last weekend has also cast some clouds over the HRC export market. Market sources suggested some exporters have already suspended their offers to the region in fear of potential war-related risks.

For now, China's spot and futures markets for HRC remain calm in the face of the Mid-East turmoil. On March 4, Mysteel assessed China's national price of Q235 4.75mm HRC at Yuan 3,266/t, which was actually lower by a small Yuan 25/t or 0.76% from the start of February.

On March 5, the most-traded HRC contract for next May delivery on the Shanghai Futures Exchange closed the daytime trading session at Yuan 3,209/t, also down by Yuan 56/t or 1.7% on month, the bourse's data showed.

Source:Mysteel Global