The decline in ferrous metals prices is evident. What is the impact on galvanized sheets? [SMM Analysis]

Since the beginning of the year, CRC prices have been continuously falling, and recently they have accelerated their decline, reaching a three-year low. As an important raw material for galvanized sheets, how does the recent significant drop in CRC and HRC prices impact the galvanized sheet market?

Firstly, from the perspective of profit. According to SMM, some producers adopted long-term agreements for raw material procurement. In a declining price market, the raw material prices locked in advance were relatively high. Together with the current off-season consumption, weak demand showed no improvement, putting pressure on galvanized sheet prices, which continued to decline. The production profits of some galvanized sheet producers were compressed, even reaching a loss state, prompting some producers to consider maintenance and production cuts to get through the off-season, affecting the final galvanized sheet operating rate.

Secondly, from the perspective of orders. The galvanized sheet market has a traditional sentiment of "buying when prices rise, not when they fall." The rapid decline in black raw material prices made it difficult for end-users to predict future price trends, leading many to adopt a wait-and-see approach, with some galvanized sheet orders being delayed. Additionally, the real estate market remained sluggish this year, and the home appliance and automotive industries also entered the off-season in Q3. Together, these factors continued to weaken the galvanized sheet market.

Additionally, by segment, the real estate market remains sluggish this year, with weak orders in the construction segment persisting. In H1, funds from national bonds and other sources were planned for infrastructure construction projects, but consumption has not shown significant improvement yet. Attention should be paid to the implementation effects in Q3 and Q4. The home appliance and automotive industries enter a consumption off-season in Q3, with weakened production and sales impacting their galvanized sheet orders. Although related galvanized sheet producers maintained operations in July, due to continued order declines, some companies are already planning maintenance and production cuts in August.

Overall, the decline in ferrous metals prices has impacted the production profits of some producers. Coupled with sluggish downstream demand, galvanized sheet operating rate may remain at low levels in August. Attention should be given to the performance during the consumption peak season.