Strong Sentiment Supports Short-Term Market Trend, While High Profits Make It Difficult to Increase Construction Steel Maintenance Volume

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

In the first half of the week, as the impact of the "anti-rat race" news faded, spot prices pulled back slightly. However, in the second half of the week, with the upcoming Central Urban Work Conference and rumors of "restarting shanty town renovations," the market trading atmosphere warmed up. Rebar futures fluctuated upward, and spot prices in various 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 construction steel production this week was relatively small.

By region, according to the SMM survey, the impact of maintenance on construction steel production in central and east China slightly decreased this week. In central China, some steel mills resumed production of construction steel rolling lines in stages to meet their monthly production schedules. Meanwhile, some steel mills resumed production of construction steel rolling lines that were under maintenance last week at the beginning of this week. Additionally, in east China, some steel mills resumed production of bar rolling lines, leading to a decrease in the impact of maintenance on rolling lines in these two regions. In contrast, in north China, some steel mills planned to conduct maintenance on a 1,080m³ blast furnace starting from July 15 due to unsatisfactory demand and poor blast furnace tapping, which would slow down the production pace of supporting construction steel rolling machines. The impact of maintenance on construction steel production slightly increased. In north-west and south-west China, steel mills maintained their maintenance status on rolling lines 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 site project progress will be somewhat restricted. During the off-season of seasonal demand, overall transactions are unlikely to see significant improvements. However, considering that the total inventory of construction steel is still being depleted, the supply-demand imbalance is not apparent for the time being. In the short term, rebar price trends are mostly driven by strong sentiment, and the weak reality of the off-season will drag down the height 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 decrease. It is expected that the impact of maintenance on construction steel production may continue to decrease next week.