Improved profitability: The operating rate of steel mills using externally purchased billets increased by 3% MoM in July.

In July, the price trend of construction steel nationwide fluctuated upward, with a price increase of 217 yuan/mt MoM. Amidst repeated fermentation of expectations for macro policies and "anti-rat race" production restriction policies, futures prices fluctuated upward, and spot prices in various regions rose to varying degrees. However, influenced by high-temperature and rainy weather, project progress slowed down, downstream demand was mediocre, and overall transaction volume was average.
Cost side, this week, coke has issued its fifth round of price increases, slightly improving the coking loss situation. Considering that steel mills still have profits and hot metal production remains high, the demand for coke does not decrease. Therefore, it is expected that this round of price increases will likely be implemented, and short-term cost side price support remains.
Supply side, currently, blast furnace steel mills have relatively good overall profits and relatively strong production willingness. Most maintenance blast furnaces have resumed production, and steel mills have weak willingness for new maintenance. Recently, overall hot metal production has been relatively stable. EAF steel mills have seen improved profitability, with some electric furnaces extending their operating hours. However, considering the current reduction in steel scrap volume and changes in the scrap collection grades of blast furnace steel mills, some scrap grades overlap with those of electric furnaces, increasing the scrap collection pressure for electric furnaces. The increase in the operating rate of electric furnaces may be limited in the later stage. This month, finished steel prices have risen, and the profitability of steel mills using externally purchased billets for rolling has slightly improved, with some steel mills extending their operating hours.
Demand side, influenced by policies such as "anti-rat race" and "expanding domestic demand," market sentiment has been boosted, and some speculative demand has been released. However, the high-temperature and rainy weather in July continued, limiting outdoor construction progress. Downstream demand release was relatively mediocre, and end-users mostly maintained purchasing as needed.
Overall, currently, construction material prices have risen, and the profitability of steel mills using externally purchased billets has improved. This month, two new enterprises have extended their operating hours, and the operating rate of steel mills using externally purchased billets has slightly increased. During the traditional off-season, the market continues to be dominated by sentiment trends. Subsequent production restrictions due to the military parade may disrupt the supply side, and spot prices still have the potential to rise. Therefore, it is expected that the operating rate of steel mills using externally purchased billets may increase slightly in August.