[February SMM Operating Rate for Rolling Mills] Rolling Mills Gradually Resume Work, February Operating Rate at 16.21%

【SMM Operating Rate of Steel Mills Using Externally Purchased Billets】According to the SMM survey, as of February 26, the operating rate of steel mills using externally purchased billets, which mainly produce construction materials, was 16.21%, up 16.21 percentage points MoM and 1.92 percentage points YoY.

In February, domestic rebar prices fluctuated. As of February 26, the highest rebar price was 3,396.1 yuan/mt, and the lowest was 3,345.4 yuan/mt.

Cost side, the tenth round of coke price cuts was implemented, causing some coke enterprises to incur losses. However, coke supply remained in surplus, and the inventory buildup situation showed no signs of reversal. In the short term, coke prices are expected to fluctuate downward. Supply side, blast furnace steel mills maintained normal production, while EAF steel mills gradually resumed production after the Lantern Festival. As of February 25, only 22% of electric furnace mills in the SMM sample had not resumed production, including some mills temporarily closed for upgrades. However, due to poor production profitability, most electric furnace mills focused on off-peak electricity production, resulting in relatively small pressure on the supply side of construction materials. Steel mills using externally purchased billets also resumed operations after the holiday, with an operating rate of 16.21% this month. However, falling finished product prices negatively impacted production profitability. Demand side, downstream construction sites gradually resumed operations, leading to an increase in market demand. Although construction material inventory continued to accumulate, the growth rate had significantly slowed.

In summary, after the Lantern Festival, both supply and demand increased, and the fundamental imbalance was not significant. In the short term, steel prices are expected to remain volatile. As the Two Sessions approach, the market still holds expectations for related policies. Future attention should focus on the sustainability of steel demand and policy developments during the Two Sessions. Some steel mills using externally purchased billets plan to resume production in March, and the operating rate of these mills is expected to continue rising in March.

Chart-1: Operating Rate Trend of Steel Mills Using Externally Purchased Billets, 2021-2025