Galvanizing Performance in Q3: Initial Decline Followed by Recovery, What to Expect in Q4? [SMM Analysis]

SMM, October 29: The third quarter of 2024 has ended. Overall, the operating rate initially declined and then recovered. The impact of extreme weather in south China and the entry of zinc downstream consumption into the off-season led to a weakening of the galvanizing operating rate, maintaining a low-level fluctuation. However, entering September, the galvanizing operating rate showed some improvement. What will be the trend in the fourth quarter?

According to SMM's weekly operating rate data, the galvanizing operating rate in Q3 was around 57%, continuing to decline from Q2. This was mainly due to the downstream consumption entering a seasonal off-season starting in Q3, with high temperatures, typhoons, and heavy rainfall causing flooding and frequent extreme weather, limiting outdoor construction. Additionally, as the real estate and infrastructure projects had not yet recovered, ferrous metal prices continued to decline, reaching an annual low in mid-September. Traders changed their trading strategies, avoiding large stockpiles, which hindered galvanized pipe sales. To mitigate risks, companies also refrained from excessive stockpiling, resulting in a continued low-level fluctuation in operating rates. However, entering September, downstream consumption entered a seasonal peak, the impact of extreme weather gradually diminished, project construction resumed, and orders related to steel towers, PV, and transportation showed improvement. Furthermore, national policies provided a boost at the end of September, leading to a recovery in the overall operating rate, although it remained weaker than the same period last year.

Looking ahead to the fourth quarter, ferrous metal prices are expected to rise significantly in October due to policy boosts, with downstream traders increasing their purchases and company orders improving noticeably. However, starting at the end of October, pollution weather frequently occurs in north China, with increased environmental protection-driven production restrictions in Hebei and Tianjin, significantly impacting operating rates. Additionally, policy transmission to the end-use sector still requires time, making the overall ferrous metal trend relatively weak. As November approaches, the weather in north China cools down, project construction begins to wrap up, and heating starts in mid-November, leading to persistent pollution weather, which will significantly impact orders and operating rates in north China. It is expected that the operating rate in Q4 will continue to decline compared to Q3.