H1 has passed. How will galvanized sheet perform in H2? [SMM Analysis]

SMM June 27 News:

      In the first half of the year, domestic cold-rolled prices continued to decline, driving down the prices of finished galvanized sheet products. The "rush to buy amid continuous price rise and hold back amid price downturn" mentality persisted downstream, with domestic trade orders remaining lukewarm. The "export rush" gradually faded away. How did galvanized sheet perform in the first half of the year? And how will it fare in the second half?

Let's look at domestic trade orders.

• Construction sector: According to data from the National Bureau of Statistics (NBS), the cumulative year-on-year decrease in newly started construction area for real estate from January to May was 22.8%, with the decline narrowing somewhat but still in negative growth territory, continuing to drag on zinc demand. Before the Chinese New Year, as workers gradually took leave, orders for domestic galvanized sheet plants continued to weaken. Although there was a seasonal recovery in orders for construction plates in March and April after the holiday, with rising domestic temperatures and the arrival of the rainy season in south China in June, orders for domestic construction plates worsened again. Entering the second half of the year, the third quarter coincides with high temperatures in China, and outdoor construction projects are expected to weaken MoM. Related orders are expected to perform poorly. Although domestic trade orders may improve MoM in September and October, orders for construction plates are expected to worsen again at the end of the fourth quarter as temperatures drop.

• Home appliance sector: According to NBS data, from January to May, the cumulative YoY increase in washing machine production was 9.3%, the cumulative YoY decrease in refrigerator production was 1.5%, and the cumulative YoY increase in air conditioner production was 5.9%. Overall, the production and sales of the three major white goods in China performed well in the first half of the year. According to SMM, domestic consumption subsidy policies continued to promote mid-to-low-end home appliance consumption, which also drove orders for related home appliance plates. Additionally, home appliance manufacturers stocked up on raw materials in advance for summer sales promotions, resulting in good order performance for domestic home appliance plates in March and April. However, as stocking orders were gradually digested, orders for home appliance plates are now performing mediocrely. In July, the third batch of trade-in funds for consumer goods in China this year was allocated, and it is expected that related policies will support domestic home appliance production and sales, with end-use demand continuing to drive domestic home appliance plate orders in the second half of the year.

• Auto sector: According to data from the China Association of Automobile Manufacturers (CAAM), from January to May this year, auto production and sales reached 12.826 million units and 12.748 million units respectively, up 12.7% and 10.9% YoY. Among them, NEV production and sales reached 5.699 million units and 5.608 million units respectively, up 45.2% and 44% YoY. NEV new car sales accounted for 44% of total new car sales. Driven by NEV production and sales, orders for automotive galvanized sheet increased YoY in the first half of the year, with related orders performing well. It is expected that orders for automotive galvanized sheet will continue to operate steadily in the second half of the year.

Now, let's look at export orders.

       According to data from the General Administration of Customs, from January to May, the cumulative exports of galvanized sheet increased by 11.64% YoY, indicating a continued strong performance in domestic galvanized sheet exports. Due to the resurgence of tariff disputes between China and the US, some overseas countries placed export orders for galvanized sheet in advance to avoid subsequent tariff barriers. Coupled with the strict crackdown on "buying orders for export" in China starting from April, domestic galvanized sheet manufacturers rushed to meet deadlines for export orders, leading to a significant increase in export orders for galvanized sheet in March and April. In May, the tariff range between China and the US declined significantly, but domestic galvanized sheet manufacturers reported poor performance in new export orders. The previous "rush to export" orders were gradually digested, and galvanized sheet exports weakened somewhat. Entering H2, as overseas markets gradually enter the off-season, coupled with a certain degree of consumption frontloading from the previous "export rush", it is expected that galvanized sheet exports will continue to decline in Q3. However, demand for galvanized sheet in Southeast Asian countries remains robust, and the overall export performance of galvanized sheet in H2 is expected to maintain a positive growth trend YoY.

(The above information is based on market collection and comprehensive assessment by the SMM research team. The information provided in this article is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make cautious decisions and not rely solely on this information, replacing their own independent judgment. Any decisions made by clients are unrelated to SMM.)