Steel Mills Resume Production After "Military Parade," Impact from Maintenance on Construction Steel Likely to Decline

According to the SMM survey, the impact from maintenance on construction steel increased during this period (8.3-9.5), as some blast furnace steel mills implemented rotational shutdowns of their rebar rolling lines due to production restrictions for the military parade. The impact from maintenance on construction steel reached 1.2374 million mt this period, up 18,300 mt MoM.

Last week, weather conditions improved slightly in both southern and northern China. During the transition from the traditional off-season to peak season, regional real estate demand saw phased releases, leading to a slight increase in procurement demand. Additionally, the number of newly awarded infrastructure projects downstream rose recently, but actual construction steel demand for some projects still requires time to materialize, resulting in limited short-term demand support. Rebar prices remained in the doldrums, with the nationwide average price at 3,196 yuan/mt, down 10.2 yuan/mt MoM, and the price center shifted lower. In contrast, raw material prices showed resilience in the first half of the week due to earlier rumors of coal mine accidents, squeezing steel mill profits further. Later, some coal mine rumors were debunked, with limited impact on actual production. Moreover, as the military parade approached, blast furnace shutdown plans were gradually implemented, leading to weaker raw material demand and softer prices, which slightly improved steel mill profits. Overall, blast furnace steel mills currently face compressed production margins, but most remain profitable and maintain previous production levels. Only a few mills implemented rotational blast furnace shutdowns due to environmental protection-driven production restrictions for the parade, resulting in corresponding rebar rolling line suspensions.

Per the SMM survey, the impact from maintenance on construction steel declined in both north and central China, as some blast furnaces resumed operations alongside their rebar rolling lines. In north China, production resumptions were mainly concentrated in Shanxi. Meanwhile, the impact from maintenance increased in central and south-west China. In Henan, multiple steel mills implemented rotational blast furnace shutdowns to comply with environmental restrictions for the parade, suspending their rebar rolling lines. In Yunnan, a few mills conducted routine maintenance on rebar rolling lines last week, with the impact reflected in this period. Other regions saw no significant changes in maintenance impact compared to the previous week.

Looking ahead, market sentiment is divided over demand recovery expectations during the September-October peak season. Some traders anticipate an "underperforming peak season" as the dominant trend. However, considering that construction activities in Beijing-Tianjin-Hebei will gradually resume after the military parade, demand may see phased improvements, potentially providing some support to the bottom range of construction steel prices. Blast furnace steel mill profit margins are unlikely to be breached in the short term. With profits intact, mills have little incentive for voluntary production cuts. Additionally, post-environmental restrictions, most are expected to resume production as planned. The impact from maintenance on construction steel is likely to decline next period.