[SMM Rebar Daily Review] Profitability Diverges Between Long and Short Process Routes; Raw Material Side May Still Drive Finished Steel Prices Higher

This week, rebar prices continued to hold up well, rising to highs early in the week before pulling back slightly in the latter half. On the supply side, the fourth round of coke price increases was implemented, costs continued to rise, and steel mill profitability showed no improvement. Most producers maintained previous production levels, but a few steel mills in North China implemented production cuts through banking furnaces due to losses, leading to a slight decline in wire rod production. Recently, electric furnace mills have seen marginal profits from off-peak power production, and some have slightly extended operating hours, but production using flat-rate power remains loss-making, so the upside for production growth is limited. On the demand side, speculative demand increased this week amid the market rally, but actual downstream demand release fell short of expectations, and overall demand remained mediocre. In terms of inventory, both mill inventories and social inventories continued to destock this week, but the pace of mill inventory decline slowed, with actual cargo pick-up speeds from agents and direct-supply projects remaining average. Looking ahead, with steel mills operating at a loss, their willingness to purchase raw materials at high prices is declining, and the room for supply-side growth in the short term is relatively controllable. On the price front, rebar fundamentals are currently not enough to support a rapid rise in spot prices, and price movements will continue to fluctuate around coking coal and coke price trends. With the tight supply pattern for coking coal and coke unlikely to change, spot prices are still expected to see price hike expectations next week, with attention on demand realization in the short term.