Steel Mill Profits "Critical," Impact from Maintenance on Construction Steel May "Expand"

According to the SMM survey, the impact from maintenance on construction steel saw a slight decrease during the current period (11.1-11.7), mainly due to production resumptions at the construction steel rolling lines of multiple steel mills in east China last week. The impact from maintenance on construction steel during this period reached 1.2428 million mt, down 40,500 mt WoW.

On the macro front in the first half of the week, the meeting between the Chinese and US leaders coupled with the US Fed's interest rate cuts continuously boosted market expectations, improving trading sentiment and driving synchronous increases in both futures and spot prices for rebar. In the latter half of the week, as the final outcomes of the news did not exceed expectations, market sentiment pulled back after peaking, with focus returning to fundamentals. Current inventory levels remain higher than the same period last year, putting upward pressure on rebar prices. Overall, construction steel prices showed a trend of rising first and then falling last week. The weekly average price for representative rebar in east China was 3,136 yuan/mt, up 32 yuan/mt WoW. In contrast, on the cost side, with the implementation of the second round of coke price increases, cost support for construction steel per mt remained strong, while steel mill profitability for construction steel continued to compress. Some mills have currently reduced production loads, and several have successively announced annual maintenance plans, with maintenance periods mostly concentrated in mid-to-late November and December. In the short term, as multiple steel mills resumed production at their construction steel rolling lines according to planned maintenance schedules last week, the impact from maintenance on construction steel continued to decrease this period.

According to the SMM survey, the impact from maintenance decreased in the north-west, east, and north China regions. In north-west China, an individual steel mill halted operations for equipment repairs, but its blast furnace and construction steel rolling lines returned to normal production in the previous period. In east China, multiple steel mills resumed production at their rebar or wire rod rolling lines as planned last week following maintenance. In north China, an individual steel mill conducted phased production resumptions at its construction steel rolling lines during this period due to maintenance on specialty product rolling lines, resulting in surplus hot metal. Rolling lines at steel mills in other regions maintained their maintenance status from the previous week, with no significant changes in the impact from maintenance.

Looking ahead, after the realization of macro tailwinds, short-term market sentiment is experiencing a phased pullback, and macro-driven momentum has weakened. Currently, as northern regions gradually enter winter, outdoor construction is hindered, and the market is in a transition phase between peak and off-seasons for demand. Inventory reduction remains the main theme going forward, and spot prices may show a fluctuating trend rangebound. On the cost side, the implementation of a third round of coke price increases is highly probable, and per mt steel costs are expected to remain firm in the short term. Steel mill profitability may continue to be compressed, reducing production willingness. It is possible that more mills will temporarily schedule annual maintenance plans later on, and the impact from maintenance on construction steel is expected to increase slightly next week.