With Steel Mills' Profit of 100 Yuan per Ton and Low Inventory Levels, the Impact from Construction Steel Maintenance May Continue to Decline

According to the SMM survey, the impact from maintenance on construction steel declined slightly this week (6.21-6.27). Multiple steel mills resumed production on their construction steel rolling lines that were under maintenance last week or this week, resulting in an impact from maintenance on construction steel of 1.2689 million mt this week, down 8,800 mt WoW.

Last week, rebar prices consolidated, with the average spot price rising slightly. The center of the average price of iron ore, a raw material, shifted downward, and the fourth round of coke price cuts were implemented successively. This slightly expanded the profit margin for construction steel production, with most steel mills maintaining a profit level exceeding 100 yuan per mt. Consequently, their willingness to voluntarily cut production was weak, leading to a slight decline in the impact from maintenance on construction steel this week.

By region, according to the SMM survey, the impact from maintenance on construction steel declined in the four regions of north-east China, north-west China, central China, and south China. In north-east China, one steel mill's blast furnace maintenance affected construction steel output, and it plans to resume production on its blast furnace this week, potentially increasing the volume of pig iron allocated to construction steel. In other regions, some steel mills resumed production on their construction steel rolling lines that were under maintenance last week or this week. In contrast, the impact from maintenance on construction steel increased in north China, east China, and south-west China. In north China, some steel mills' construction steel rolling lines underwent maintenance in late June, while in south-west China, a steel mill plans to add a new rolling line for maintenance this week.

Looking ahead, the phased rainfall in south China has affected the release of demand, significantly impacting the construction progress of some construction sites. In the traditional off-season for demand, terminal end-user purchases are mainly driven by immediate needs. Considering that current in-plant and social inventories are at low levels, resulting in relatively small inventory pressure, and that most blast furnace steel mills still have profit margins in producing construction steel, the production enthusiasm of steel mills is unlikely to decline in the short term. According to the SMM survey, steel mills in north China and south China resumed production on their rolling lines this week, while some steel mills in north China will begin to resume production on their rolling lines next week. It is expected that the impact from maintenance on construction steel may decline next week.