[SMM Hot-rolled & Cold-rolled Production Schedule] - Production Resumptions After Maintenance & Slight Increase in Order-taking Pressure. Cold-rolled Production Schedule Basically Stable in June, While Hot-rolled Daily Average Production Schedule Increases

• SMM Cold-rolled Production Schedule: Daily average production schedule for cold-rolled steel at steel mills basically stable in June

According to the latest SMM survey, the total planned volume of cold-rolled commercial materials for 31 mainstream steel mills specializing in cold-rolled sheet and coil in June was 4.344 million mt, a decrease of 5,800 mt or 0.13% compared to the actual production of cold-rolled commercial materials in May. On a daily average basis, June had one fewer day than May, resulting in a planned daily average volume of 144,800 mt for cold-rolled steel in June, up 3.20% from the actual daily average production in May.

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

Data source: SMM Steel

• SMM Hot-rolled Production Schedule: Daily average production schedule for hot-rolled steel increases by over 5%

According to the latest SMM survey, the total planned volume of hot-rolled commercial materials for 39 mainstream steel mills specializing in hot-rolled sheet and coil in June was 14.2862 million mt, an increase of 264,500 mt or 1.89% compared to the actual production of hot-rolled commercial materials in May. On a daily average basis, June had one fewer day than May, resulting in a planned daily average volume of 476,200 mt for hot-rolled commercial materials in June, up 23,900 mt or 5.28% from the actual daily average production of hot-rolled commercial materials in May.

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

Data source: SMM Steel

This month, the planned volume of hot-rolled commercial materials for 52 mainstream steel mills specializing in hot-rolled sheet and coil, after the expansion of SMM's sample, totaled 17.5282 million mt, with the daily average planned volume increasing by 4.44% compared to the actual production in May.

Chart-2: Rolling Sample of Hot-rolled Production Schedule

Data source: SMM Steel

In June, some steel mills that had undergone maintenance earlier concluded their maintenance and gradually resumed production. Additionally, from the perspectives of profitability and order-taking, the current situation for hot-rolled coil at most steel mills is slightly better than that for construction materials. Overall, the enthusiasm of steel mills for hot-rolled coil production is moderate. Under these combined influences, the daily average production schedule for domestic hot-rolled steel in June increased significantly MoM from May.

Breakdown by domestic and foreign trade:

Domestic trade: The planned production volume for hot-rolled sheet and coil in domestic trade in June was 13.0984 million mt, with a daily average of 436,600 mt, an increase of 19,300 mt or 4.6% from the actual domestic daily average production in May.

Table-2: Comparison of Order-Taking at Some Steel Mills in SMM Survey

Data source: SMM Steel

According to the SMM survey, as of June 6, although some sample steel mills still had order gaps, most steel mills had basically filled their domestic trade orders, and the order-taking pressure had also increased somewhat compared to early May. SMM will continue to track the subsequent order-taking situation.

Foreign trade: The planned export volume for hot-rolled sheet and coil in June was 1.1878 million mt, an increase of 101,800 mt or 9.37% MoM from the actual exports in May. The planned export volume for hot-rolled steel at domestic steel mills in June increased slightly MoM from the actual export volume in May.

Chart-3: Planned Export Volume of Hot-Rolled Commercial Products from Sampled Mainstream Steel Mills

Data source: SMM Steel

In terms of maintenance, the impact from hot-rolled maintenance in June was temporarily 669,000 mt, down 299,800 mt MoM from 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 track the subsequent situation. For detailed maintenance information, please refer to the following table:

Table-3: Maintenance Details of Hot-Rolled Steel Mills

Data source: SMM Steel

On the profit side, according to the SMM survey on the real-time profitability of steel mills producing HRC, the current real-time profits of most steel mills are concentrated in the range of 50-150 yuan/mt, a decrease from the level in early May. In detail, about 8% of steel mills reported current losses exceeding 100 yuan/mt; 8% reported losses in the range of 50-100 yuan/mt; 15% were at the break-even point; 34% reported profits in the range of 50-150 yuan/mt; and 35% reported profits exceeding 100 yuan/mt.

Chart-4: Real-Time Profitability of HRC from Some Steel Mills Surveyed by SMM in the Past Two Months

Summary: The daily average planned production of hot-rolled products from domestic steel mills in June increased MoM compared to the actual production in May, mainly due to the gradual resumption of production at some steel mills that had previously undergone maintenance, coupled with the slightly better profitability of producing HRC compared to other products like building materials. Under the combined influence, the daily average production schedule for hot-rolled products in China increased significantly in June.

Looking ahead, as the off-season approaches, downstream demand will be impacted to a certain extent and weaken. In terms of supply, the production schedule for hot-rolled products in June increased MoM, in line with market expectations. The inventory pressure for hot-rolled products will gradually emerge in mid-to-late June. However, considering that current inventory levels are at a low point compared to the same period in recent years, the accumulation of fundamental contradictions in the short term will be limited.

In terms of news, periodic speculations about external trade wars, macro policies, and rumors of production restrictions on the supply side, in the absence of unexpectedly favorable policy stimuli, the average price of HRC in June is expected to decline slightly.