Weak Demand and Low Profits Dual Constraints, Construction Steel Impact from Maintenance May Continue to Rise

According to the SMM survey, the impact from maintenance on construction steel increased during the current period (9.13-9.19). Last week, multiple steel mills conducted maintenance on blast furnaces and associated rolling lines, which was concentrated in the current period. Additionally, individual steel mills added maintenance on bar rolling lines. The impact from maintenance on construction steel reached 1.3147 million mt, up 49,200 mt from the previous period.

Last week, the Guinean government required developers such as Rio Tinto and Baowu to build supporting processing and smelting plants locally at Simandou. The government is restricting mining companies from exporting iron ore to overseas plants, which supported ore prices to hold up well, keeping construction steel production costs high. On the finished products side, heavy rain in many regions affected construction site schedules, and demand from the September peak season has been slow to materialize, leading to significantly weak market confidence. Construction steel prices remained in the doldrums, with the nationwide average price at 3,120.6 yuan/mt last week, down 10.6 yuan/mt WoW, and the price center continued to decline. Overall, finished products performed weaker than raw materials, and steel mill profits continued to compress. Some mills reported that rebar gross profits fell by 20-40 yuan/mt last week, with immediate rebar profits at break-even or even slightly negative for some mills, reducing production enthusiasm. Multiple steel mills continued maintenance on blast furnaces and associated rolling lines as planned, while individual mills prioritized hot metal supply for variety products and halted rebar rolling lines, leading to a continued increase in the impact from maintenance on construction steel in the current period.

According to the SMM survey, the impact from maintenance on construction steel increased in south-west China, east China, north China, and north-east China. In north-east and north China, steel mills conducted maintenance on blast furnaces and associated rolling lines in the previous period, which was concentrated in the current period. Additionally, in north China, individual steel mills prioritized hot metal supply for strip rolling lines and halted rebar rolling lines due to rebar profits being lower than those for strip products. In east China and south-west China, multiple steel mills conducted maintenance on construction steel rolling lines. In contrast, in central China, individual mills adopted intermittent production for coiled rebar rolling lines, with plans to resume production from September 15 to September 21, leading to a slight decrease in the impact from maintenance on construction steel in central China.

Looking ahead, on the macro front, the US Fed interest rate cut remains a key focus, and market expectations for positive news persist. However, the latest data for August on real estate and infrastructure-related indicators were still not ideal, and weak real demand in the industry is unlikely to significantly improve market sentiment, putting spot prices under pressure to rise. Cost side, the short-term tight balance in iron ore supply and demand may support prices to stabilize and rebound; coke supply-demand imbalance is accumulating, and the market may remain in the doldrums. Under these combined effects, construction steel cost pressure is expected to persist, and steel mill profits are unlikely to improve significantly, weakening production willingness. Additionally, considering annual maintenance plans and crude steel reduction requirements, steel mills may arrange maintenance shutdowns in advance, potentially leading to new maintenance plans in the next period and a continued increase in the impact from maintenance on construction steel.