SHANGHAI, May 13 (SMM) – Ferrous metals officially entered the peak year of the commodity in April. Raw materials and finished products broke through historical highs, and the costs and profits of steel mills rose simultaneously. According to SMM survey, the achieved production stood at 8.43 million mt in April, up 3.5% from the previous month.

Approaching the delivery of the 05 contract in early May, the market was about to enter a short-selling state. Due to the positive news, the crude steel reduction policy is expected to heat up, and the China-Australian relations deteriorated in the ore crisis. The steel market was stimulated to break away from the fundamentals of the industry. With the continuous support of funds and steel mills, steel prices soared by nearly 1,000 yuan/mt within 10 days.

At present, the national average rebar prices stood at 6,110 yuan/mt, and the steel mill's gross profit per mt of steel came in at 1,080 yuan/mt. Despite the continuous news of production restrictions for environmental protection, steel mills' enthusiasm for increasing production remained high. Planned output of construction steel rebar across China's major blast furnace steelmakers is estimated to rise 3.02% from the achieved production in April to 8.68 million mt in May, showed an SMM survey. Scheduled production of wire rods is likely to increase 0.49% from the actual output in April to stand at 3.09 million mt in May.

Planned rebar output across China's major blast furnace steelmaker

SMM survey showed that the sample steel mills had no planned maintenance of rebar and rolling lines in May. Planned output of rebar in May is expected to increase 10.91% in Northeast China, up 6.72% in North China, up 0.28% in Northwest China, up 1.71% in East China and up 1.54% in Middle-of-south China.

Substantial profits on the supply side drove steel mills to increase production, and production restriction policies could not hinder the release of production. In the situation of booming production and sales, rebar output increased 2.15% year on year in early May. On the demand side, the downstream restocking was affected by the holiday at the beginning of the month, and the transaction was acceptable. However, as the prices further exceeded 6,000 yuan/mt, some end-users were temporarily suspended under high prices, and procurement was postponed. Rigid demand was greatly suppressed.

In addition to fundamentals, capital and other factors, the current market sentiment is more bullish. Before the 05 contract is delivered, the short-selling market will continue to increase. The fall in demand during the rainy season in the south, and the callback after prices rose rapidly and transactions in high-priced resources was blocked should be monitored.