【March SMM Operating Rate of Steel Mills Using Externally Purchased Billets】Steel mills using externally purchased billets resumed production, and the operating rate increased by 5.93% MoM in March.

【SMM Survey on Operating Rate of Steel Mills Using Externally Purchased Billets】According to the SMM survey, as of March 31, the operating rate of steel mills using externally purchased billets, mainly producing construction steel, was 22.14%, up 5.93 percentage points MoM and 1.93 percentage points YoY.

3In March, national construction steel prices fluctuated. On March 3, the rebar price was 3,351.7 yuan/mt, the highest in March. Later, due to slower-than-expected recovery in downstream demand, the futures market fluctuated downward, and the spot price center of construction steel shifted lower. On March 21, the rebar price was 3,228.4 yuan/mt, the lowest in March.

Cost side, coke inventory is currently at a low level, and hedging orders have increased. In the short term, the supply and demand of raw materials have entered a tight balance, with relatively small fundamental imbalances. Supply side, the profitability of blast furnace steel mills has improved, and steel mills' production willingness is moderate. Some blast furnaces that were previously under maintenance have resumed normal production as planned, and pig iron production has increased. EAF steel mills, due to less-than-ideal profitability, have reduced operating hours, and it is expected that the operating rate will not increase significantly in the short term. Steel mills using externally purchased billets have gradually resumed production after the Chinese New Year, with one additional mill resuming production this month, driving the overall operating rate of such mills to increase. This month, the operating rate of steel mills using externally purchased billets was 22.14%, up 5.93% from the previous period. Overall, steel production is still increasing. Demand side, construction steel demand continues to recover, but the current project funding rate is average, and the recovery speed of demand is still slower than market expectations.

Overall, although the market is in a peak season cycle, the recovery of demand is weaker than expected. After the rebound in steel production, the supply pressure of construction steel has increased, and market sentiment is cautious. Later, as the weather gradually warms up, downstream demand may continue to increase. However, constrained by funding conditions, it is not advisable to be overly optimistic about steel prices. Therefore, it is expected that the increase in the operating rate of steel mills using externally purchased billets will be limited in April.

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