SMM Analysis: Traditional Off-Season Arrives, December Construction Steel Demand Declines

In November, with the arrival of cold wave weather, north China experienced snowfall, bringing outdoor construction projects to a close, while projects in south China progressed as scheduled, with some rushing to meet deadlines. The market entered a macro vacuum period in November, speculative sentiment faded, and the ferrous metals series futures market fluctuated in line with the stock market, with the overall fluctuation range narrowing.

In December, as the weather continues to cool, the market will enter a seasonal off-season, with outdoor projects in north China gradually halting, leading to a continued decline in construction steel demand. On the macro side, December will be a "macro month" with several major meetings scheduled, and the market still holds expectations for year-end housing project delivery and national economic work arrangements.

1. New Orders for Enterprises Are Generally Average

According to the SMM survey, 35% of the surveyed enterprises have recently taken on new projects, down 5% MoM, while 65% are still continuing with existing projects and have not yet received new ones.

China Construction Eighth Engineering Division Corp., Ltd. stated: "There have been very few projects in the second half of this year, and there are no new projects this month. The ongoing projects are proceeding normally, and some projects have been completed. Currently, the financial situation is not good, with no significant changes."

China State Construction Engineering Corporation Third Bureau stated: "There are no new projects coming in now. We are currently working on previous projects, with no completed projects. It is uncertain if there will be new projects in the future. Compared to last year, we have not started winter stockpiling yet."

China Railway Construction Corporation Urban Construction Company stated: "The projects we are responsible for have been completed, and other projects are proceeding normally. There are not many projects now, and no new projects are coming in. We have heard about special bonds, but nothing has been implemented here yet. There will be no new projects until year-end."

According to the SMM survey, the financial constraints in the construction material industry have shown no significant improvement this period. 40% of the surveyed enterprises still face financial constraints, unchanged from the previous period, while 60% have relatively normal finances, maintaining normal production operations.

China State Construction Engineering Corporation Third Bureau stated: "We still have new projects, and the funding for these projects is good. However, the overall financial situation of the company is tight, mainly due to industry-wide issues. Our project funds are in regulated accounts, so there is no problem with that. We will rush to meet deadlines before the Chinese New Year."

China State Construction Engineering Corporation Sixth Bureau South China Branch stated: "We are rushing to meet deadlines, and the project progress is good. We can work until the Little New Year, and the weather impact is minimal. There are no issues with funding, and client payments are timely, following the schedule. No new projects have been finalized, and although there are tenders, they are unlikely to be completed before the year-end, probably in H1 next year."

China Railway Sixth Bureau Beijing Construction Company stated: "There are no projects now, and previous projects have been completed. No new projects are coming in, and procurement has stopped. We are currently idle, and the financial situation is not good."

3. Downstream Enterprises Maintain a Wait-and-See Attitude Towards the Market

According to the SMM survey, 60% of downstream enterprises remain optimistic about the market, down 5% MoM. Market participants are optimistic about the major meetings in December and year-end economic work, maintaining expectations for the market. 40% of enterprises hold a wait-and-see attitude towards the market environment, believing that the off-season demand recovery still needs time, and the short-term market situation is unlikely to improve significantly.

China New Era Construction Limited stated: "There are no new projects now, and procurement has stopped. Given the current situation, winter stockpiling is unlikely. We have heard about special bonds, but nothing has been implemented yet, possibly next year."

China Communications Construction First Harbor Engineering Company stated: "There are no new projects recently. As the year-end approaches, new projects are expected next year. Current projects are ongoing, and procurement is as needed. The market is unlikely to change significantly in the next three months."

China Railway Fourteenth Bureau Group Fourth Engineering Company stated: "We have not heard about early bond issuance. Even if issued, it would take time to allocate from the provincial government to cities and districts, with many projects in each district. The actual allocation to projects may be minimal. Projects are basically stable until year-end, and the number of projects next year is not expected to exceed this year. Competition among state-owned and provincial enterprises is intense. More enterprises are focusing on the Western Development, and competition for western projects may be fiercer next year. It is worth paying attention to that area."


In summary, the market entered the heating season in north China in November, with outdoor construction projects in north China coming to a close, and some projects in south China rushing to meet deadlines. As year-end approaches, enterprises mainly focus on existing projects, with a key focus on fund collection. In December, the market will focus on the macro meetings, with the Central Economic Work Conference likely to maintain a positive stance on next year's macro policies. Therefore, December construction steel demand is expected to decline, but speculative demand may remain hopeful.