China's domestic flat steel market has been gaining upward momentum since the start of October on strong demand from manufacturing segments such as vehicles, home appliances and containers.
Comparatively low inventories of flat steel products has also helped support prices.
Spot market prices of hot-rolled coil and cold-rolled coil in Shanghai increased by 3% and 2%, respectively, over Oct. 1-13, Platts data showed.
Some market sources said demand for auto sheet was a major driver for the stronger market, benefiting CRC the most. Some said sales margins for some cold-rolled auto sheet had recently reached Yuan 500/mt ($74/mt) or even close to Yuan 1,000/mt ($149/mt) at some mills in eastern China.
One source said auto sheet demand may plateau in October and gradually ease towards the end of 2020, due to seasonal factors. He said the robust auto sheet demand was generated by strong vehicle production and sales, which was partly due to government stimulus and partly due to pent-up demand for cars as consumers avoided the coronavirus.
Meanwhile, demand for China's home appliances has improved in both domestic and overseas markets. Some sources said steel demand from home appliances manufacturers in October had been even stronger than a year ago. They said home appliance manufacturing was likely to gain sustainable support from the recovery in overseas markets towards the end of 2020.
Moreover, container manufacturing, benefiting from recovering global trade, has also helped boost demand for flat steel products.
China's flat steel inventories have been trending downwards steadily since business resumed on Oct. 9, after swelling during the National Day holidays over Oct. 1-8. This indicated that supply pressure on the flat steel market will be limited in October.
HRC inventories in both Shanghai and in southern China's Lecong dropped 3% over Oct. 9-14. HRC inventories as of Oct. 14 in Shanghai were just 1% higher on the year, and 13% higher on the year in Lecong, according to local traders.
-- Analyst Jing Zhang
