[SMM survey] "Supported" by 100-yuan profit per tonne of steel, impact from maintenance of building materials may continue to decline

According to the SMM survey, the impact of maintenance on building materials production lines declined slightly this week (6.28-7.4). Both last week and this week, steel mills resumed production on their building materials rolling lines after maintenance, resulting in an impact of 1.2642 million mt from maintenance on building materials production lines this week, a slight decrease of 4,700 mt WoW.

Source: SMM

Last week, rebar prices were in the doldrums, with the average spot price dropping slightly. Prices of iron ore and coke, the raw materials, also fell slightly. The cost decline outpaced that of finished steel products, expanding the profit margins for blast furnace steel mills producing building materials. Currently, most steel mills maintain profits exceeding 100 yuan, with little willingness to voluntarily cut production. As a result, the impact of maintenance on building materials production lines declined slightly this week.

By region, according to the SMM survey, the impact of maintenance on building materials production lines decreased in the northeast, north, and south regions. In the northeast and south regions, steel mills resumed production on their building materials rolling lines after maintenance last week. In the north region, fluctuations in maintenance on building materials production lines were mainly concentrated in Shanxi Province, where a steel mill resumed production on its bar and wire rod rolling lines after maintenance, leading to a significant decrease in the impact of maintenance. However, considering that a steel mill in Shanxi plans to conduct maintenance on a 1,860m³ blast furnace starting from July 1 to support production control, the impact of maintenance will mainly be reflected next week. In contrast, the impact of maintenance on building materials production lines increased in the east and south-west regions. In the east region, two steel mills plan to halt production for maintenance on their blast furnaces this week. In the south-west region, steel mills maintained their rolling lines under maintenance as last week. There were no significant changes in the impact of maintenance on building materials production lines in the north-west and south-west regions.

Looking ahead, heavy rains and floods in the south-west, as well as high temperatures in the east and central China, have significantly hindered construction activities at downstream terminals, resulting in generally average market transactions. In terms of inventory, there is currently a slight accumulation in in-plant inventory. Agents are primarily relying on in-plant shipments to reduce their own inventory pressure, leading to a continuous de-stocking of social inventory. Overall, the inventory pressure for building materials is relatively small. In summary, the short-term seasonal decline in demand is occurring at a relatively fast pace, and the trends of in-plant inventory and social inventory may continue to diverge. However, the cost side provides strong support, and building material prices are likely to consolidate. It is expected that steel mills' production profits for building materials will remain above 100 yuan, with high production enthusiasm. The impact of maintenance on building materials production lines may continue to decline next week.

Source: SMM