Multiple Steel Mills Resume Production After Maintenance, Impact from Maintenance on Construction Steel Slightly Decreases

According to the SMM survey, the impact from maintenance on construction steel saw a slight decrease during the current period (10.25-10.31), mainly due to multiple steel mills resuming blast furnace operations following maintenance last week. The impact from maintenance on construction steel this period was 1.3021 million mt, down 36,600 mt WoW.

As the traditional October peak season for construction steel nears its end, favorable weather conditions increased in central and south China, leading to a slight acceleration in construction project progress and a modest release of demand. Additionally, as some northern regions gradually enter winter, procurement volumes at most projects have increased at this stage. Overall demand showed some improvement, and inventory continued to draw down. However, compared to levels in the same period in recent years, inventory remains high, putting pressure on price increases. Last week, construction steel prices basically fluctuated rangebound. The weekly average price of representative rebar in east China was 3,105 yuan/mt, down 9 yuan/mt WoW. In contrast, on the cost side, stricter environmental and safety inspections were implemented in the Wuhai area of Inner Mongolia early last week, coupled with strict checks on overproduction, leading to some mines suspending or cutting production. The trends for coking coal and coke moved upward, and market notifications for a second round of coke price increases were successively implemented. Construction steel costs remained relatively firm, continuously compressing profit per tonne of steel and reducing steel mills' production enthusiasm. Recently, several mills have successively executed their annual maintenance plans. As multiple steel mills completed maintenance last week, the impact from maintenance saw a slight decrease in the current period.

According to the SMM survey, the impact from maintenance on construction steel decreased in the north-west, east, and north China regions. In north-west China, an individual steel mill experienced equipment failure last week, leading to the shutdown of its construction steel rolling line. In east China, two construction steel mills completed blast furnace maintenance from the previous period and returned to normal production. In north China, an individual steel mill resumed production of its wire rod rolling line as planned last week. In contrast, the impact from maintenance in central China saw a slight increase, mainly because an individual steel mill, having met its monthly wire rod production target, implemented a phased shutdown of its wire rod rolling line. Rolling lines at mills in other regions maintained their maintenance status from the previous week, with no significant change in the impact from maintenance.

Looking ahead, positive results from the US-China trade talks over the weekend and US CPI data supporting expectations for a US Fed interest rate cut fueled positive market sentiment, providing some support to futures. However, returning to fundamentals, as many northern regions successively enter the winter break, construction progress at worksites is slowing. Furthermore, most end-users primarily purchase as needed, making large-scale concentrated procurement releases fundamentally difficult. The pace of construction steel inventory drawdown may be relatively limited, and upward momentum for spot prices is insufficient. Construction steel prices are expected to mainly move sideways next period. On the cost side, with the implementation of the second round of coke price increases, cost support is unlikely to collapse in the short term, and steel mill profitability may remain near the break-even line in the near term. The possibility of more steel mills scheduling annual maintenance plans cannot be ruled out, and the impact from maintenance on construction steel is expected to increase slightly next week.