Steel Mill Profits Drive Production, Impact from Construction Steel Maintenance May Continue to Decline

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

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 from maintenance on construction steel production this week.

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

Looking ahead, with high temperatures continuing in many regions, the construction pace at some construction sites has been hindered, and the market is still in the seasonal off-season for demand, making it difficult to improve 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 that the total inventory continues to decline and contradictions do not yet stand out, there are no conditions for a significant price drop in the short term. From a profit perspective, most steel mills may still maintain a profit level of over 100 yuan, and their production enthusiasm is unlikely to decrease. It is expected that the impact from maintenance on construction steel production may continue to decline next week.