[SMM survey] Strong sentiment steers short-term market trends; high profits "set the tone" for maintenance expansion difficulties in building materials sector

According to the SMM survey, the impact of maintenance on building materials declined slightly this week (7.12-7.18). Some steel mills resumed production of building material rolling lines after maintenance last week, resulting in an impact of 1.2678 million mt from maintenance on building materials this week, a slight decrease of 2,000 mt WoW.

Source: SMM

In the first half of the week, as the impact of the "anti-rat race" news faded, spot prices pulled back somewhat. However, in the second half of the week, with the impending Central Urban Work Conference and rumors of "restarting shanty town renovations" stimulating the market, trading sentiment warmed up. Rebar futures fluctuated upward, and spot prices across regions followed suit. Rebar profits remained considerable, and most steel mills maintained their current production pace. The overall fluctuation in the impact of maintenance on building materials this week was relatively small.

By region, according to the SMM survey, the impact of maintenance on building materials in central and east China declined slightly this week. In central China, some steel mills resumed production of building material rolling lines in stages to meet their monthly production schedules, while some steel mills resumed production of building material rolling lines after maintenance early this week. Additionally, in east China, some steel mills resumed production of bar rolling lines, leading to a decrease in the impact of rolling line maintenance in these two regions. In contrast, some steel mills in north China plan to conduct maintenance on a 1,080m³ blast furnace starting from July 15 due to unsatisfactory demand and poor blast furnace tapping, which will slow down the production pace of supporting building material rolling lines, resulting in a slight increase in the impact of maintenance on building materials. In north-west and south-west China, steel mills maintained their rolling line maintenance status from last week, with no significant changes in the impact of maintenance.

Looking ahead, with high temperatures and frequent rainfall expected in July-August, construction progress at construction sites will be somewhat restricted. Seasonal demand is in the off-season, and overall transactions are unlikely to see significant improvements. However, considering that the total inventory of building materials is still being depleted, the supply-demand imbalance is not yet apparent. In the short term, rebar price trends are largely driven by strong sentiment, and the weak reality during the off-season will limit the extent of spot price increases. In the short term, most steel mills are expected to maintain profit levels above 100 yuan per mt, and their production enthusiasm is unlikely to wane. It is anticipated that the impact of maintenance on building materials may continue to decline next week.

Source: SMM