[SMM Rebar Daily Review] Strong sentiment drives up spot price, while weak industry reality limits upside potential

This week, rebar prices fluctuated upward, with the nationwide average price currently at 3,166 yuan/mt, up 47.5 yuan/mt MoM.

On the supply side, according to SMM survey data, the daily average production of rebar at blast furnace steel mills in July decreased slightly by 2.2% MoM, with the decline mainly concentrated in the southwest and east China regions. Steel mills in the southwest region face high inventory pressure, while some steel mills in the east China region have good order-taking and profitability for certain steel products, and have plans to cut production of construction steel in July. Other steel mills that solely produce construction steel remain profitable, and their short-term production enthusiasm remains high. Although the profitability of EAF steel mills has improved, most are still operating at a loss. Additionally, electricity prices in some parts of east China have slightly increased during the summer vacation. It is expected that the operating rate of electric furnaces will continue to remain at a medium-to-low level in the short term, with no significant increase in production. On the demand side, high temperatures and frequent rainfall are prevalent in July-August, which has somewhat restricted the construction progress of site projects. During the off-season of seasonal demand, overall transactions are unlikely to show significant improvement. In summary, short-term price trends will continue to be driven mainly by strong sentiment, but the weak reality during the off-season will limit the upside potential of spot prices. After the sentiment fades, the market will return to industry logic. Under the dual weakness of supply and demand, it is expected that spot prices may fluctuate downward.