Galvanizing operations saw a significant decline in July. How will demand be in August?[SMM Analysis]

July marks the traditional off-season, with a significant pull back in overall demand for galvanizing. Moreover, extreme weather conditions occur frequently, disrupting the operations of end-users. Overall, the operational situation is poor. How are the performances in northern and east China? Can the situation improve in August?

In July, the operating rate in North China continued to pull back. Enterprises in North China mainly produce galvanized pipes. In July, ferrous metals prices fluctuated upward. Boosted by anti-"rat race" competition policies in mid-month, prices surged significantly, and the volume of goods shipped improved slightly. However, actual demand remained sluggish. Enterprises mainly focused on liquidating inventory for cash, and there was no significant increase in the operating rate. Moreover, affected by extreme weather conditions, terminal operations were restricted. Heavy rains in northern China in early July led to production shutdowns at some enterprises, and high temperatures prompted some enterprises to grant high-temperature vacations. Overall production was not satisfactory. Enterprises were concerned about subsequent demand, and orders for round pipes related to the real estate sector saw a pullback. Additionally, the price war for galvanized pipes intensified, leading to a significant decline in enterprise profits. In August, enterprises reduced their production schedules.

The operating rate in east China also declined in July. The region mainly focuses on galvanizing structural components. New orders for steel towers have been gradually released, leading to an increase in the operating rate of steel tower enterprises. However, orders for guardrails and PV products have pulled back significantly, and export orders have also pulled back due to tariff impacts. Entering August, negotiations on China-US tariffs continued, and enterprises were not optimistic about subsequent demand. Due to the high temperatures, some enterprises only operated at night, and production schedules were reduced.

Overall, demand remains weak during the traditional consumption off-season, and the high-temperature weather continues to suppress enterprise production, leading to a weakening in production schedules.