[SMM Steel End-Use Demand Report] Downstream Enterprises Gradually Resume Work and Production: Will the "Golden March and Silver April" Arrive as Expected?

After the Lantern Festival in February, the market experienced a wave of resumption of work and production, with downstream enterprises gradually resuming operations and downstream demand recovering. As post-holiday production and business activities accelerated, the manufacturing PMI rebounded. In February, China's manufacturing PMI stood at 50.2%, up 1.1 percentage points MoM, returning to the expansion territory. From a macro perspective, the fiscal deficit ratio in 2025 is expected to rise from 3.0% in 2024 to 3.5%-4.0%, releasing approximately 1-1.3 trillion yuan of additional fiscal space to provide sufficient funding for stabilizing growth. In March, the market will witness the convening of major meetings. As a key window to observe China's economic and policy trends, this year's Two Sessions have attracted global attention, especially at the critical period of concluding the 14th Five-Year Plan and laying out the 15th Five-Year Plan. The market holds high expectations for policy signals released during the Two Sessions. 1. New Orders for Enterprises Remain Moderate According to the SMM survey, 38% of surveyed enterprises have recently secured new projects, up 3% MoM, while 62% are still working on old projects without receiving new ones. China Railway 14th Bureau Group Electrification Engineering Co., Ltd. stated: "Projects have gradually started, but there is no urgency at the moment. Current projects are mainly those from before the holiday, and new projects will begin next month. The number of projects this year should be similar to last year, with relatively small changes." China Construction Third Engineering Bureau Co., Ltd. stated: "Projects have resumed, but there is no rush to meet deadlines as workers have not fully returned, and operations are still in the recovery phase. A new project was secured in February, currently in the land leveling stage, with seven projects under construction." Shanghai Construction Group Fourth Construction Co., Ltd. stated: "Material usage is currently low, with only a small number of projects starting. The project situation this year is still not optimistic, competition is intense, and no new projects have been issued yet, which may take some time." Chart-1: Project Undertaking in Real Estate and Infrastructure Sectors 2. Financial Constraints Show No Significant Improvement According to the SMM survey, financial constraints in the construction materials sector showed no significant improvement this period. 55% of surveyed enterprises still face financial difficulties, up 5% from the previous period, while 45% reported relatively normal financial conditions, sufficient to maintain normal production operations. China Railway Shanghai Engineering Bureau stated: "The project situation this year is not good. So far, only a few projects have started, all of which are old projects with no new ones. Project cycles are longer, and local financial conditions are poor, with very little funding actually reaching projects. With fewer projects and more competing enterprises, the market situation is unfavorable." Zhejiang Yasha Decoration Co., Ltd. stated: "Projects have gradually entered the construction phase, but progress is slow, with no rush to meet deadlines. Last year, there were over 40 projects, and this year is expected to maintain that level. Financial conditions are currently manageable, with good year-end fund recovery, and the situation is no longer very tight." China Communications Second Navigation Engineering Bureau Co., Ltd. stated: "Projects have resumed normally, with new projects coming in this month. Unfinished projects from before the holiday are also proceeding as usual. Steel procurement remains stable without significant changes. Overall, financial conditions are acceptable, though they vary by project, with some projects facing financial challenges." Chart-2: Financial Status in Real Estate and Infrastructure Sectors 3. Downstream Enterprises Maintain a Wait-and-See Sentiment Toward the Market Outlook According to the SMM survey, 47% of downstream enterprises remain optimistic about the market outlook, down 6% from the previous period, believing that with increased policy support during the Two Sessions, overall demand may improve to some extent. Meanwhile, 53% of enterprises hold a wait-and-see attitude, citing multiple factors leading to relatively weak market demand. They believe that the transition from policy introduction to implementation requires time, making short-term improvements unlikely. China Railway Third Engineering Group Co., Ltd. stated: "Some projects have not yet started but will gradually commence. However, the government lacks funds, and the state is also short of money. The project situation is not good, with few new projects this year. Financial constraints are a common issue for all construction companies, and expectations for this year are not positive, possibly worse than last year. Even some national-level projects are facing financial difficulties, and decisions on whether to proceed depend on funding availability. Currently, there are no new projects or promising directions." China Gezhouba Real Estate Nanjing Division stated: "The current focus is on promoting housing for rigid demand, with large-sized units not yet launched. Sales were better in December 2024 but declined in January and worsened across the board in February, with sales stagnating. Everyone is waiting for the market to bottom out. Currently, there is only one project under construction in Nanjing, and the housing market outlook for H1 remains pessimistic." China Railway Guangzhou Engineering Bureau stated: "Projects have not yet started. Once they do, pre-holiday projects will proceed as usual. However, there has been no significant improvement overall, and no changes are expected in the next three months. There are no completed projects at present, and financial conditions remain challenging. The industry outlook is not optimistic." Chart-3: Market Outlook Expectations in Real Estate and Infrastructure Sectors In summary, after the Lantern Festival in February, downstream enterprises gradually resumed work and production. However, some enterprises, constrained by financial issues, were not in a hurry to meet deadlines, resulting in a slower overall construction pace. Consequently, the resumption rate and labor attendance rate in the end-use market were lower than the same period last year. In March, the market will see the convening of the Two Sessions, which will conclude the 14th Five-Year Plan and lay a solid foundation for the 15th Five-Year Plan. This has drawn significant market attention. Additionally, as the weather gradually warms, outdoor projects in northern regions will also commence, leading to expectations of stable demand for construction materials in March. * [Survey Method: Telephone Survey] * [Sample data includes over 100 enterprises nationwide across infrastructure, real estate, automotive manufacturing, home appliances, and machinery processing sectors.] * For more SMM steel information, analysis reports, and database access, please contact the SMM Steel Division.