[SMM Hot-rolled & Cold-rolled Production Schedule] – Some Steel Mills Add Maintenance & Profit Margins Slide; Daily Average Production Schedule for Hot-rolled and Cold-rolled in May Pulls Back MoM!

• SMM Cold-rolled Production Schedule: Increasing Pressure from Orders & Profitability; MoM Decline in Cold-rolled Production Schedule of Steel Mills in May

According to the latest SMM survey, the total planned production volume of cold-rolled commercial materials for 31 mainstream steel mills producing cold-rolled coils in May was 4.3248 million mt, a decrease of 128,700 mt or 2.89% compared to the actual production volume of cold-rolled commercial materials in April. On a daily average basis, there was one more day in May than in April, with a daily average planned production volume of 139,500 mt, representing a 6.02% MoM decline from the actual daily average production volume in April.

 Table 1: Planned Production Volume of Cold-rolled Commercial Materials for 31 Mainstream Cold-rolled Steel Mills

Source: SMM Steel

• SMM Hot-rolled Production Schedule: Additional Maintenance at Some Steel Mills; Slight MoM Decline in Hot-rolled Production Schedule in April

According to the latest SMM survey, the total planned production volume of hot-rolled commercial materials for 39 mainstream steel mills producing hot-rolled coils in May was 14.1287 million mt, an increase of 55,800 mt or 0.4% compared to the actual production volume of hot-rolled commercial materials in April. On a daily average basis, there was one more day in May than in April, with a daily average planned production volume of 455,800 mt for hot-rolled commercial materials in May, representing a decrease of 13,300 mt or 2.8% from the actual daily average production volume of hot-rolled commercial materials in April.

Chart-1: Planned Production Volume of Hot-rolled Commercial Materials for New Sample of Hot-rolled Steel Mills

This month, the total planned production volume of hot-rolled commercial materials for 52 mainstream steel mills producing hot-rolled coils, after the expansion of SMM's sample, was 17.4987 million mt, with a 0.8% increase in daily average planned production volume compared to the actual production volume in April. In mid-to-late April, the profitability of steel mills producing both hot-rolled and cold-rolled products pulled back slightly on a MoM basis. Coupled with the upcoming off-season in downstream consumption, some steel mills adopted a cautious stance on the future market outlook, with generally low enthusiasm for increasing production. Additionally, some steel mills announced new maintenance schedules, leading to a MoM decline in the daily average production schedule for both hot-rolled and cold-rolled products in May.

Source: SMM Steel

Domestic vs. Export Trade:

Domestic Trade: The planned production volume of hot-rolled coils for domestic trade in May was 12.9627 million mt, with a daily average of 418,200 mt, representing a decrease of 13,300 mt or 3.1% from the actual domestic daily average production volume in April. In May, some steel mills announced new maintenance schedules, coupled with the upcoming off-season in downstream consumption, making it difficult for steel mills to have the willingness to increase production. As a result, the planned production volume of hot-rolled coils for domestic trade in May pulled back on a MoM basis.

Table 2: Comparison of Order Taking at Some Steel Mills Surveyed by SMM

Source: SMM Steel

According to the SMM survey, as of May 8, most sample steel mills had already filled their domestic trade orders. The order taking for hot-rolled products in domestic trade was moderate this month, not yet affected by the off-season. However, some steel mills voluntarily controlled their order volumes due to production cuts. Additionally, the pressure on order taking for cold-rolled products further increased at some steel mills.SMM will continue to monitor the subsequent order-taking situation.

Foreign trade: The planned HRC exports for May are 1.166 million mt, an increase of 36,000 mt compared to the actual exports in April, representing a MoM increase of 3.2%. The planned HRC exports for domestic steel mills in May show relatively small fluctuations compared to the actual exports in April. With the ongoing escalation of the tariff war, many enterprises are actively exploring other markets. According to the SMM survey, many steel mills had already filled their export shipment orders for May by mid-to-late April, and the export volume from steel mills in May is expected to remain at a relatively high level.

Chart-2: Comparison of HRC export prices in major global markets

Chart-3: Planned HRC commodity material exports for mainstream steel mills in the HRC sample

Data source: SMM Steel

In terms of maintenance, the impact from HRC maintenance in May is temporarily estimated at 784,200 mt, an increase of 38,900 mt compared to the previous month. The announced maintenance activities are mainly concentrated in steel mills in east China, north China, and western regions. SMM will continue to monitor the subsequent situation. For specific maintenance details, please refer to the following table:

Table-3: Details of HRC steel mill maintenance

Data source: SMM Steel

Regarding profitability, based on the SMM survey of real-time profits from steel mills producing HRC, the current real-time profits of most steel mills are concentrated in the range of 100 yuan/mt and above, showing a decrease compared to the level in early April. In detail, about 5% of steel mills reported current losses exceeding 100 yuan/mt; 9% reported losses in the range of 50-100 yuan/mt; 14% were at the break-even point; 27% reported profits in the range of 50-150 yuan/mt; and 45% reported profits exceeding 100 yuan/mt.

Chart-4: Real-time profitability of HRC production at some steel mills surveyed by SMM

Summary: The planned daily average HRC production for domestic steel mills in May shows a slight MoM decrease compared to the actual production in April. On one hand, some steel mills have added new equipment maintenance. Additionally, as the downstream consumption off-season approaches, most steel mills have low willingness to increase production.

Looking ahead, in terms of demand, entering May, downstream demand will be impacted to a certain extent by the off-season, and it is expected that the apparent demand for HRC will pull back MoM in May. In terms of supply, the HRC production schedule for May shows a slight MoM decrease compared to April, slightly better than previously expected. Overall, entering the off-season, downstream demand is slowly pulling back. Coupled with the expectation that the Sino-US tariff negotiations are unlikely to reach a conclusion in the short term, and the periodic fermentation of rumors about production restrictions on the domestic supply side, uncertainties in the macro and industrial news have increased. It is expected that HRC prices will continue to face downward pressure in the short term. During the verification process of off-season demand, if there is a lack of favourable macro front to drive the market, there is potential for further downward movement in HRC prices.