Galvanizing Operations Weakened in May, Will They Continue to Decline in June?[SMM Analysis]

May marks the tail end of the peak season, with downstream consumption gradually weakening and operating rates in north, east, and south China experiencing varying degrees of decline. How will the operating rate trend in June?

In May, the operating rate in north China dropped back slightly. Enterprises in the region primarily focus on galvanized pipes, with the operating rate for galvanized pipes also declining slightly. The main reasons for this were the drop in ferrous metals prices starting from mid-to-late May and the lacklustre performance of real estate projects. Affected by the rainy season in the south, demand weakened, and traders had poor sentiment for restocking. The overall orders for galvanized pipes weakened, leading to a reduction in enterprise operating rates. Entering the traditional off-season in June, overall orders remained sluggish. Moreover, the price war for galvanized pipes intensified, causing a significant decline in enterprise profits. As a result, enterprises continued to reduce their production schedules in June.

In May, the operating rate in east China also declined. The region primarily focuses on galvanized structural components. Although there were continuous new tenders and a gradual release of new orders for steel towers, with overall steel tower orders remaining robust, many galvanising enterprises also began to take on steel tower orders due to the decline in other orders, resulting in intense market competition and a reduction in production schedules for steel tower enterprises. Export orders pulled back slightly due to tariff impacts. PV orders also saw a significant YoY decline. Entering June, east China began to experience frequent high-temperature and rainy weather, affecting project construction and leading to a reduction in overall production schedules.

In May, the operating rate in south China decreased, with overall demand being weak. South China is not a major consumer of galvanized products and is more affected by weather conditions, resulting in a more pronounced decline in demand and poor operating rates.

Looking ahead to June, with the arrival of the traditional off-season, overall export orders are expected to remain weak. As the south gradually begins to be affected by high temperatures and the rainy season, construction activities will become increasingly restricted. Enterprises are not optimistic about demand in June and are expected to reduce their overall production schedules.