[SMM survey] Production supported by steel mill profits, impact from maintenance of building materials may continue to decline

According to the SMM survey, the impact of maintenance on building materials production this week (7.5-7.11) decreased slightly. Last week, two steel mills resumed production as planned after maintenance of their rolling lines, resulting in an impact of 1.2678 million mt on building materials production this week, a slight decrease of 4,400 mt WoW.

Data source: SMM

Last week, the Central Financial and Economic Affairs Commission meeting issued signals on addressing cut-throat competition. Under the stimulation of positive news, the market trading atmosphere improved. Rebar prices fluctuated upward, with an average spot price of 3,119 yuan/mt, up 57 yuan/mt WoW. The profit levels of most blast furnace steel mills expanded, and their willingness to voluntarily reduce production was relatively small, leading to a slight decrease in the impact of maintenance on building materials production this week.

By region, according to the SMM survey, earlier, individual steel mills in south-west China conducted annual routine maintenance on their building materials rolling lines and resumed production as scheduled last week, resulting in a decrease in the impact of rolling line maintenance. However, considering the shutdown of a 1,350m³ blast furnace and supporting building materials rolling machines for maintenance starting from July 3, the decrease in the impact of regional rolling line maintenance this week was reduced. In contrast, the impact of rolling line maintenance in north and east China slightly increased, mainly due to the commencement of blast furnace maintenance in both regions last week, with the impact reflected this week. Steel mills in north-west and central China maintained their rolling line maintenance status from last week, with no significant changes in the impact of maintenance.

Looking ahead, with high temperatures continuing in many regions, the construction pace at some sites has been hindered, and the market remains in the seasonal off-season for demand, with little improvement expected in spot trading performance. As the positive news on "anti-cut-throat competition" fades, there is a high likelihood of rebar prices pulling back. However, considering the continued de-stocking of total inventory and the lack of prominent contradictions, there are currently no conditions for a significant price drop in the short term. From a profit perspective, most steel mills are expected to maintain profit levels above 100 yuan, and their production enthusiasm is unlikely to diminish. It is anticipated that the impact of maintenance on building materials production may continue to decrease next week.

Data source: SMM