Poor demand to further drag on May operating rates at galvanising plants

SHANGHAI, May 10 (SMM) – The average operating rate across Chinese galvanising plants lost 4.22 percentage points on-month to stand at 86.83% in April, as demand weakened after downstream buyers stepped up purchases ahead of April's VAT cuts, an SMM survey showed on Friday May 10. 

On a yearly basis, the rate climbed 0.7 percentage point in April. 

SMM learned that poor demand drove some galvanised pipe producers to cut production last month, and falling processing fees eroded profits at plants of galvanised structural parts, which also lowered the operating rates from March. 

However, some large galvanised pipe producers continued to hike output in April with robust orders, and this capped the decline in overall operating rates. 

The rate is expected to fall 3.75 percentage points month on month to stand at 83.08% in May, down 3.51 percentage points from May 2018, showed the SMM survey. Downstream demand will weaken further after the traditional high season in March-April. 

A buildup in inventories of finished products and high costs will slow operation across galvanised pipe plants. Late release of infrastructure demand will also provide little support to the production of galvanised structural parts in May.