Steel prices hit record highs, orders at galvanising producers weakened MoM in May

SHANGHAI, Mar 18 (SMM) — SMM survey showed that the capacity of the galvanising producers sample stood at 37.09 million mt in April and output at 2.46 million mt, and the operating rates at 79.62%, down 0.04 percentage point from the previous month. In addition, output of new samples in March was adjusted to 2,462,600 mt, and the operating rate was adjusted to 79.67%. Old sample: The capacity of galvanising enterprises sample was 10.81 million mt in April, the output at 828,900 mt, and the operating rate at 91.98%, up 0.74 percentage point from the previous month. The decrease in operating rate in April compared with March is due to a wait-and-see outlook held by end-users amid high steel and zinc prices and lower profits.

By sectors, end-users orders at galvanised pipe companies continued to decline due to the increase in prices of steel and zinc ingots. Operating rates at large factories also declined with greater pressure on finished products inventory and rising losses. On galvanised structural parts, pressure on small factories was greater than that of medium and large-scale enterprises, and overseas orders were better than domestic orders. Among them, domestic scaffolding orders have weakened, and orders for steel towers and photovoltaics have also decreased to varying degrees.

Orders for agricultural greenhouses at home and abroad remained strong. High-speed rail poles still have demand. Galvanised plate/sheet companies raised their production mainly due to the impact of the domestic export tax rebate policy.

Operating rates at large enterprises with an annual production capacity of more than 500,000 mt increased 2.37 percentage points to 90.42% on the month. According to SMM survey, operating rates at large galvanising plants increased slightly in April due to resumption of production at some large plants in north China after the end of environmental restrictions. However, prices of steel and zinc ingots still trended higher, and the company’s losses have increased. Losses at galvanised pipe enterprises stood at about 200-400 yuan/mt, and end-users held a wait-and-see outlook. Demand continued to decrease, dealers restocked as required, and large factories gradually reduced production amid high inventory pressure. Operating rates at medium-sized enterprises with an annual production capacity of 100,000 to 500,000 mt decreased 5.57 percentage points to 66.94% on the month. According to SMM survey, costs increased amid high prices of steel and zinc ingots in April. Some orders were locked in before CNY, and the profits of new projects also shrank sharply. Extrusion processing fee was higher than profits while steel purchase margin increased. Restocking cargoes by end-users was muted. Companies reduced production amid increasing liquidity pressure. However, the performance of high-speed rail projects has been relatively stable, and overall operating rates at producers fell. Operating rates at small companies with an annual production capacity of less than 100,000 mt decreased 3.8 percentage points to 67.72% on the month. According to SMM survey, small companies have had difficulties in production, end-users orders held a wait-and-see sentiment outlook, and scaffolding orders fell sharply. High steel and zinc ingot prices pressured on orders. Some producers suspended production as the processing fee declined and profits were even lower than the processing fee. Orders for steel towers and photovoltaics were muted, which has dragged down the operating rates. According to the company's production scheduling plan, operating rates of galvanised zinc declined 4.01 percentage points on the month to 75.61% in May. The month May have more holidays and prices of steel and zinc ingots hit a record high. Galvanising zinc producers reduced and even suspended production as losses increased, orders from end-users continued to fall.