Profit Effect Maximized, Impact from Construction Steel Maintenance Easy to Decrease but Hard to Increase

According to the SMM survey, the impact of construction steel maintenance on output increased slightly this week (7.26-8.1). Some steel mills began to sell other steel varieties, leading to a reduction in the supply of construction steel billets and intermittent production shutdowns of rolling lines. The impact of rolling line maintenance on output this week was 1.2968 million mt, increasing slightly by 16,000 mt WoW.

Last week, in terms of macro news, the expectations from the Political Bureau meeting remained, and market sentiment remained high. Meanwhile, on the raw material side, at the beginning of the week, it was reported that "the General Office of the National Energy Administration issued a notice on organizing and carrying out inspections of coal mine production to promote stable and orderly coal supply." On Friday, a 4.2 magnitude earthquake occurred in Linfen, Shanxi, causing repeated fluctuations in market sentiment in the coking coal market, with multiple daily limit-ups during the week. Market speculation enthusiasm remained high, and high sentiment combined with strong costs guided the upward fluctuation of construction steel futures and spot prices. Rebar prices fluctuated upward, with a national weekly average price of 3,344.8 yuan/mt, increasing by 144.2 yuan/mt WoW. In east China, the profit per mt of rebar generally remained above 200 yuan, and steel mills had strong production enthusiasm, with most maintaining their production pace. The impact of construction steel maintenance on output fluctuated relatively slightly this week.

By region, according to the SMM survey, only individual steel mills in east China adjusted their sales product mix this week, resulting in a reduction in billet allocation for construction steel rolling lines and intermittent production shutdowns of some rolling lines, leading to a slight increase in the impact of construction steel maintenance on output. Rolling lines of steel mills in other regions maintained their maintenance status from last week, with no significant changes in the impact of maintenance on output.

Looking ahead, as multiple positive news items continue to be absorbed, trading enthusiasm has begun to wane, and the market is gradually returning to fundamentals. Currently, there is heavy rainfall in the south and high temperatures persist in the north, affecting construction site work rhythms. Terminal procurement remains mainly driven by rigid demand, with weak off-season demand characteristics evident. Construction steel prices may come under pressure. Iron ore and coke prices are still expected to rise, potentially compressing steel mills' profit margins. However, it is anticipated that a profit of 100 yuan per mt of steel can still be maintained, and steel mills' enthusiasm for construction steel production is unlikely to diminish. Currently, some steel mills have rolling line maintenance plans scheduled to resume production next week, and the impact of construction steel maintenance on output may decrease next week.