Galvanizing Operating Rates Were Weaker YoY in Q1, Will Q2 See a Turnaround? [SMM Analysis]

SMM April 8 News:
Q1 coincided with the Chinese New Year holiday. Most enterprises gradually resumed work in March, with consumption performance being mediocre and galvanizing operations relatively weak. Can consumption improve in Q2?

From the perspective of SMM galvanizing operating rates, overall Q1 operating rates were weaker than in previous years. The main reason was that ferrous metals prices continued to weaken before the Chinese New Year, and traders had no winter stockpiling sentiment and did not engage in large-scale stockpiling. Sales of galvanized products were hindered, and enterprises also refrained from excessive stockpiling to avoid risks. Amid weakening demand, some enterprises began holiday shutdowns starting in January. This year, the Chinese New Year fell relatively late, and most enterprises were on holiday shutdowns in February. Although ferrous metals prices rose after the holiday and overall demand strengthened, most workers did not fully return to their posts until around mid-March, when enterprises resumed normal production. Coupled with frequent environmental protection disruptions in northern regions, the overall operating rate recovered in March but remained weaker than the same period last year.

Looking ahead to Q2, demand was still in the process of gradual recovery in March, with the overall peak season somewhat delayed, and galvanising enterprises are optimistic about demand in April and May. The real estate sector has stabilized overall, and infrastructure investment increased, but it still takes time to transmit to end-users. On the export side, orders for steel towers, guardrails, and other products remain strong.  Policy side, this year marks the first year of the 15th Five-Year Plan. During the 15th Five-Year Plan period, China is expected to construct and renovate over 700,000 kilometers of underground pipeline networks, with new investment demand exceeding 5 trillion yuan. The power grid development investment is planned at 5 trillion yuan. In April, State Grid is about to conduct its second centralized tender, and the first centralized tender for ultra-high voltage projects. Orders related to steel towers remain robust. The operating rate in Q2 is expected to be better than in Q1.