According to an SMM survey, as of August 31, the operating rate of steel mills using externally purchased billets that mainly produce construction steel was 22.21%, up 5.05 percentage points MoM and down 1.5 percentage points YoY.
In August, national construction steel prices bottomed out; as of August 28, the national average rebar price was 3,112 yuan/mt, up 60 yuan/mt MoM.
On the supply side, after the third coke price increase was proposed, expectations remain for a fourth increase. Blast furnace steel mills saw no improvement in production profitability, and steel mills in North China faced coal shortages. Some producers continued to lower production loads or conduct temporary rolling line maintenance, further easing supply-side pressure. In late August, steel scrap price gains lagged spot price gains, and EAF steel mills saw a notable improvement in profitability; they are now marginally profitable. Some producers extended operating hours, and the overall electric furnace operating rate rose. Before early-to-mid August, steel mills using externally purchased billets for rolling showed low production enthusiasm; amid falling prices, production generally incurred losses and shipments were difficult. During the sustained price rally at end-August, production profitability at these mills improved, steel mill sentiment improved, and rolling mill operating hours were raised slightly.
On the demand side, during the traditional transition from off-season to peak season, weather factors will gradually weaken and demand is expected to improve. In addition, according to feedback from end-user clients, some new projects will gradually begin construction in mid-to-late September, which will add some incremental demand.
Looking ahead, with improved production profitability at steel mills using externally purchased billets and expectations for demand improvement in September, their operating rates may still be raised in the near term.
Chart: Operating Rate Trend at Steel Mills Using Externally Purchased Billets, 2023-2026
Source: SMM
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