Impact from Construction Steel Maintenance Continues to Shrink; Production Restrictions During Military Parade May Become the Main Variable in the Future

According to the SMM survey, the impact from maintenance of construction steel production lines declined this week (8.9-8.15). Some steel mills resumed production of construction steel rolling lines last week, and no new maintenance was reported for steel mills' rolling lines this week. The impact from maintenance of rolling lines this week was 1.2532 million mt, a slight decrease of 11,200 mt WoW.

Last week, rebar prices first rose and then fell, with profit margins per ton of steel shrinking. Specifically, in the first half of the week, the driving force for the price rally was mainly on the coking coal side. As the verification of coal production capacity further advanced, the futures market for coking coal surged, driving a rebound in both futures and spot prices of rebar. Market sentiment was further boosted by rumors of production restrictions during the military parade and crude steel output reduction, with raw material prices rising more sharply than finished steel prices, leading to a decline in profit margins per ton of rebar. In the second half of the week, as the rumors cooled down, coupled with poor performance in supply and demand data for construction steel and an accelerated pace of inventory accumulation, rebar prices pulled back slightly, with raw material prices weakening in tandem and profit margins remaining largely unchanged from the first half of the week. Overall, most steel mills maintained profit margins per ton of steel above 100 yuan, indicating strong production willingness. No new maintenance plans were reported for steel mills this week.

According to the SMM survey, some steel mills in central and east China resumed production as planned after maintenance last week, while rolling lines in steel mills in other regions maintained their maintenance status from the previous week, with no significant changes in the impact from maintenance.

Looking ahead, with the persistence of high temperatures and heavy rainfall, construction site operations continue to be affected. Downstream terminal purchases remain primarily driven by immediate needs. Meanwhile, before the finalization of production restriction policies, the market remains cautious about the implementation intensity, with speculative operations being relatively prudent. Overall, construction steel demand continues to exhibit characteristics of the traditional off-season. In the short term, the influence of demand on construction steel prices is relatively limited, and market sentiment may oscillate with rumors. Profit margins per ton of rebar above 100 yuan are expected to persist, with a low likelihood of steel mills voluntarily cutting production. According to the SMM survey, steel mills in north and south-west China have plans to resume production of construction steel rolling lines next week, and the impact from maintenance of construction steel is expected to continue declining. In the short term, attention should still be paid to production restrictions and work stoppages in the north China region around the military parade on September 3, as there is a possibility that production restrictions and work stoppages at steel mills may lead to an increase in the impact from maintenance of construction steel.