[Nov SMM Survey on Operating Rate of Steel Mills Using Externally Purchased Billets] Slightly Improved Operating Margin; Operating Rate Rose 3.49% MoM

In November, national construction steel prices fluctuated upward. The average rebar price increased by 39 yuan/mt MoM. The average rebar price reached its November peak at 3,151 yuan/mt on November 25, while the lowest point was 3,066 yuan/mt on November 5.

Cost side, with the continuous decline in coal prices for furnace use, cost pressure on coking enterprises significantly eased, and industry profit margins gradually recovered, showing an improving trend. Against this backdrop, some coking enterprises saw increased production enthusiasm and began to moderately raise their capacity utilization rates. After previous phased restocking operations, downstream steel mills' coke inventory levels have largely rebounded to reasonable industry ranges, effectively consolidating inventory security. Based on current inventory levels and production pace, steel mills' short-term coke procurement demand is nearing saturation, leading to a corresponding slowdown in procurement pace. Subsequent raw material prices are expected to be in the doldrums.

Supply side, rebar production at some blast furnace steel mills remains in a loss-making range, with most maintaining their previous production schedules. For EAF steel mills, as steel scrap prices did not keep pace with the rise in finished product prices, some electric furnace mills achieved marginal profits, with overall production still primarily scheduled during off-peak electricity hours. Although building materials prices increased this month, profits for mills using externally purchased billets remained relatively modest. Most enterprises maintained their previous production pace, with only three such mills slightly increasing operating hours.

Demand side, construction progress at project sites in south China, including east China, central China, and south China, is currently good, with downstream end-users maintaining just-in-time procurement. However, in north China, including northeast China and north China, demand has seasonally declined as temperatures drop.

Overall, on the macro front, the market is entering a "macro month," with expectations for year-end efforts to ensure timely delivery of housing projects, important December meetings, and economic work. However, from a fundamental perspective, the market has entered the off-season, with overall demand weak. The market is expected to enter a weak balance pattern characterized by weak supply and demand. The operating rate of mills using externally purchased billets may decline in December. Subsequent attention should focus on macro-level developments and changes in winter stockpiling situations across regions.