Galvanising Producers' Operating Rates Rose MoM in Mar Thanks to Resumed Production from CNY Holiday

SHANGHAI, Apr 14 (SMM) - The average operating rate of galvanising producers in new SMM survey sample stood at 60.57% in March, up 26.54 percentage points from the previous month. The production capacity in the new sample stood at 39.02 million mt and output recorded 1.97 million mt.

The average operating rate in the old SMM survey sample were 69.65% in March, up 24.12 percentage points from the previous month. The production capacity in the old sample stood at 10.81 million mt and output recorded 627,700 mt.

For changes in operating rates, please refer to the table for details.

The increase in the operating rates of galvanizing enterprises in March was mainly because the production has basically returned to normal from impacts like Chinese New Year (CNY) holiday and Beijing Winter Olympics, and March has 31 calendar days. The Two Sessions and the Paralympic Games had little influences to the production. And with the gradual recovery of terminal projects, corporate sales and orders both improved, driving up the overall operating rates. In terms of sub-sectors, galvanised pipe enterprises recorded better sales performance driven by the increase in non-ferrous prices and accelerated production resumption of terminal projects in the month. However, considering the high overall absolute prices and the disturbance from the pandemic in the mid-to-late March, the growth of operating rates was less than expected. In terms of galvanised structural parts, the company basically resumed normal production in March, and the backlog of orders in the early stage was also released, lifting the overall operating rates. For galvanised plate/sheet, some European galvanised plate/sheet orders have been re-directed to China under the Russia-Ukraine conflict. And with the supplement of domestic galvanised plate/sheet orders, the general operating rates climbed.

The average operating rate of large producers with annual capacity above 500,000 mt rose 31.57 percentage points at 66.62 % in March. According to SMM research, most of the large galvanising factories are pipe factories. After the CNY holiday, the enterprises under Winter Olympics-oriented environmental protection control earlier have basically resumed normal production, and the upside trend of non-ferrous products also shored up the operating rates of large-sized factories. However, considering the high absolute prices of products and the disturbance from the pandemic, the downstream traders were uncertain about the consumption prospect, and they were unwilling to stock up too many finished products, and purchased mainly on demand. Galvanized pipe manufacturers hence were challenged with great pressure from high finished product inventory. With the end of the CNY holiday, the large galvanised structural parts factory were able to have more workers, hence the operating rates rose. However, as the infrastructure and real estate sectors remained gloomy, the overall operating rates were still lower than expected.

The average operating rate of medium-scale producers with annual capacity between 100,000-500,000 mt increased 17.44 percentage points to 47.13%. According to SMM research, the operating rates of medium-sized galvanising producers increased in March, but was far less than that of large-sized ones. It is because that the medium-sized enterprises are mainly galvanized structural parts enterprises, while only a few infrastructure and other projects have been successfully launched after the CNY, and the enterprises were basically producing for old orders. In addition, due to the rising prices of raw materials, the scale effect was unable to play a role, hence the profit was squeezed, suppressing the production enthusiasm. Among them, orders for iron towers and street light poles performed better as a whole, while orders for scaffolding were dragged down by the weak performance of real estate. At the same time, the transportation of enterprises was hindered by the outbreak of pandemic in mid and late March, which restricted the improvement of enterprises' operating rates.

The average operating rate of large producers with annual capacity below 10,000 mt increased 10.32 percentage points month on month to 46.94 %. According to SMM research, the increase in the operating rates of small producers is mainly due to the increase in working days compared with February, and the backlog of orders that could not be delivered due to environmental protection and other restrictions in the previous period. However, small producers were in lack of new orders as most orders were in the hands of large and medium-sized producers and the pandemic has also affected the production, dragging down the overall operating rates.

The average operating rate of galvanising producers is estimated at 53.49% in April, down 7.9 percentage points from March, according to the production plans. It is mainly because the pandemic situation has fermented in April, and the prevention and control measures in severely affected areas have greatly limited the production. Meanwhile, the flow of goods has been restricted, which forced the producers to suspend or stop production as the the transportation of raw materials and finished products is impeded and the costs have increased. The terminal sector is also affected, resulting in less orders and sluggish production enthusiasm.