SHANGHAI, Jun 28 (SMM) – The continuous rainy weather in the short term will continue to cap any upsides of spot rebar prices, on the backdrop of high inventories and supplies. SMM expects near-term rebar prices to hover in a narrow range, before a decline in the number of rainy days facilitates the release of pent-up demand soon and adds to upward momentum in spot rebar prices.
Blast furnace steelmakers in China continued to maintain full operations last week given existing profits, while electric arc furnace (EAF) steel mills have been compelled to slow production and their operating rates may extend the slide in the weeks ahead as weak prices of steel and firm prices of raw materials eroded profits.
SMM calculations suggested that blast furnace steel plants saw an average profit of 188 yuan/mt as of June 24, based on seaborne iron ore prices of $102.1/mt. Actual profits range from 200-400 yuan/mt as of June 24, according to an SMM survey of steel mills.
EAF steelmakers, meanwhile, were mostly on the verge of losses and have scaled back rebar production as the intensified impact of seasonality led to more significant declines in rebar prices as compared with other steel products.
SMM research showed that operating rates of 34 independent EAF steel mills in China further decreased last week, to 81.97% as of June 23, down 0.59 percentage point from June 16, following a drop of 1.03 percentage point from June 12 to 16.
The prolonged heavy rainfall expected till early-July will continue to keep consumption from unleashing in the short term, but there remain strong potentials for end-users demand in the medium-to-long term. According to a latest SMM survey, about 40% of the surveyed downstream enterprises said their purchases of steel products in July are expected to increase from June.
Speculative demand was moderate last week. Some optimistic traders restocked slightly while the market prospects for near-term rebar prices diverged.
