"Supported" by 100-yuan Profit per Ton of Steel, Impact from Construction Steel Maintenance May Continue to Decline

According to the SMM survey, the impact of construction steel maintenance declined slightly this week (6.28-7.4). Both last week and this week saw steel mills resume production of construction steel rolling lines, resulting in a maintenance impact of 1.2642 million mt for construction steel this week, a slight decrease of 4,700 mt WoW.

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 was greater than that of finished steel prices, expanding the profit margins for blast furnace steel mills producing construction steel. Currently, most steel mills maintain profits of over 100 yuan per mt, with little willingness to voluntarily cut production. As a result, the impact of construction steel maintenance declined slightly this week.

By region, according to the SMM survey, the impact of construction steel maintenance declined in the northeast, north, and south regions. Last week, steel mills in the northeast and south regions resumed production of construction steel rolling lines. In the north region, the fluctuations in construction steel maintenance were mainly concentrated in Shanxi Province, where a steel mill resumed production of bar and wire rod rolling lines, leading to a significant decrease in the maintenance impact. However, considering that a steel mill in Shanxi plans to conduct maintenance on a 1,860m³ blast furnace starting from July 1 to comply with production control measures, the impact of maintenance will mainly be reflected next week. In contrast, the impact of construction steel maintenance increased in the east and south-west regions. In the east region, two steel mills plan to halt production for blast furnace maintenance this week. In the south-west region, steel mills' rolling lines continued the maintenance status from last week. There were no significant changes in the impact of construction steel maintenance 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 downstream terminal construction, with market transactions performing generally. In terms of inventory, there is currently a slight accumulation of in-plant inventory, with agents primarily relying on factory shipments to reduce their own inventory pressure, resulting in a continuous de-stocking of social inventory. Overall, the inventory pressure for construction steel is relatively small. In summary, the short-term seasonal decline in demand is rapid, and the trends of in-plant and social inventory may continue to diverge. However, the cost side provides strong support, and construction steel prices are likely to consolidate. It is expected that steel mills' construction steel production profits will remain above 100 yuan per mt, with high production enthusiasm. The impact of construction steel maintenance may continue to decline next week.