Steel Mills Resume Production After Military Parade, Impact from Maintenance on Construction Steel Declines

According to the SMM survey, the impact from maintenance on construction steel declined during the current period (9.6-9.12) as steel mills resumed production as planned after the military parade, while some completed routine maintenance on blast furnaces, with both the furnaces and their supporting rebar rolling lines returning to operation. The impact from maintenance on construction steel reached 1.213 million mt this period, down 20,600 mt MoM.

Last week saw concentrated environmental protection-driven production restrictions for the military parade, with construction halts in some northern regions and intensified traffic controls, coupled with persistent rainfall in central and north-west China. As a result, demand during the September peak season failed to materialize as expected, downstream procurement remained cautious, and inventories at producers' warehouses and social inventories continued to accumulate at an accelerated pace. Rebar prices were in the doldrums, with the nationwide average price at 3,131.3 yuan/mt, down 64.7 yuan/mt MoM, as the price center kept trending downward. In contrast, iron ore prices on the raw material side showed relative strength, while coke prices were in the doldrums. Overall, raw materials outperformed finished products, leading to further contraction in construction steel profitability.

In summary, steel mills faced significant profit compression, with some even seeing marginal losses on rebar spot profitability, slightly dampening production enthusiasm. Several mills planned maintenance for blast furnaces and their supporting rolling lines. However, the overall impact from maintenance on construction steel edged down slightly as mills that had previously curtailed output or were affected by parade-related restrictions gradually resumed operations.

By region, the impact from maintenance on construction steel declined in north China, central China, and south-west China. In north and central China, mills that had cooperated with output controls or parade-related restrictions resumed production in the previous or current period. In south-west China, a few mills restarted blast furnaces and their supporting bar rolling lines after maintenance. The impact increased slightly in east China and north-east China, with a mill in Jiangsu planning a major overhaul of its rebar rolling line, while a mill in Liaoning conducted maintenance on a large blast furnace, halting its supporting construction steel rolling line. In other regions, rolling lines maintained their maintenance status from the previous week, with no significant changes in impact.

Looking ahead, with no clear directional macro signals recently, no sustained price trends have emerged. However, cost-side support remains, and steel mills show strong reluctance to budge on prices. Meanwhile, the market still holds some expectations for the September-October peak season, keeping traders in a wait-and-see mood and reluctant to actively engage in low-price transactions. In the short term, the downside for spot construction steel prices may be limited. Given that most mills still generate profits from construction steel production, the impact from maintenance is expected to continue declining in the next period. The focus will remain on the release of construction steel demand in the coming period.