Construction Steel Mill Profits Under Pressure, Impact from Maintenance Continues to Increase

According to the SMM survey, the impact from maintenance on construction steel increased slightly during the current period (10.18-10.24), as some steel mills switched production to other varieties and scheduled annual maintenance. The impact from maintenance on construction steel during this period reached 1.3002 million mt, up 12,000 mt WoW.

Last week, as the winter break approached in some northern regions, there was concentrated demand for rushing to meet deadlines on certain projects. Meanwhile, procurement demand from end-user projects in east China was relatively strong, leading to improved market activity and a noticeable increase in overall transaction volume. However, transaction performance in other regions remained relatively modest. Although construction steel inventory saw some drawdown driven by demand release in certain areas, the peak season demand during the "October peak season" still fell short of expectations. Current inventory levels are significantly higher than the same period last year. Construction steel prices operated under pressure last week, with the average price of representative rebar in east China at 3,114 yuan/mt, down 38 yuan/mt WoW. Immediate profit per ton of steel continued to compress. According to the survey, some steel mills in east and central China reported that their profitability was basically below the break-even line, leading to reduced production enthusiasm. Recently, some mills have switched production to other steel varieties and arranged annual maintenance, resulting in a slight increase in the impact from maintenance on construction steel this period.

According to the SMM survey, the impact from maintenance increased in east China, where some steel mills switched to producing other varieties while conducting annual maintenance on wire rod and rebar rolling lines. In contrast, the impact from maintenance decreased slightly in central and north China. In central China, an individual steel mill maintains scheduled monthly production of wire rod; after a phased production resumption on the wire rod rolling line in the previous period, normal production was maintained this period. In north China, an individual steel mill resumed production on its coiled rebar line as planned during this period. Mills in other regions maintained the same maintenance status as the previous week, with no significant change in the impact from maintenance.

Looking ahead, although the recent Fourth Plenum has been held, market response remains tepid. Coupled with the fact that peak season underperformance has become a reality, traders' wait-and-see sentiment is strong, and operations are mostly characterized by quick turnover. In the short term, construction steel prices may show a bottom fluctuating trend. Cost side, coking coal prices rose last week, fueling expectations for a second round of coke price increases. Cost support is unlikely to collapse in the short term, and profitability at construction steel mills is expected to remain at low levels, with little boost to production enthusiasm. It is anticipated that more steel mills may announce annual maintenance plans, and mills producing multiple varieties may switch to other steel products, leading to a continued slight increase in the impact from maintenance on construction steel in the next period.