What Caused the Decline in Galvanizing Operating Rates in H1 2025?
The galvanizing industry experienced a notable shift in operating rates during the first half of 2025, with a strong start followed by a gradual decline. This pattern has raised questions about how will demand be in H2 after the galvanizing enterprises operating rate moved downwards and what market participants should expect.
First Quarter Performance Analysis
January 2025 saw galvanizing operating rates start at significantly low levels, influenced by two major factors: scheduled holiday maintenance and unusually severe cold weather conditions. These elements combined to create a challenging environment for production resumption.
"After the holiday, large factories resumed production first, while small factories gradually resumed production around the Lantern Festival," according to SMM industry analysts tracking production patterns across the sector.
The resumption of operations followed a clear hierarchical pattern, with major producers mobilizing resources quickly after the holiday period, while smaller operations faced logistical challenges that delayed their return until mid-February around the Lantern Festival celebrations.
Infrastructure investment data released in February showed only slight year-over-year increases, failing to provide the substantial boost many industry participants had anticipated. This modest growth meant that most galvanizing enterprises focused primarily on fulfilling backlogged pre-holiday orders rather than meeting new demand.
March brought disappointment to many sector observers as the traditional "golden March" peak season—a reliable period of heightened activity in previous years—failed to materialize in 2025. Construction projects and work resumption progressed at a significantly slower pace than historical averages.
However, a notable policy development emerged on March 24, when the Ministry of Finance released its "2025 China Fiscal Policy Implementation Report." This document explicitly emphasized expanding effective investment and focusing on key areas to increase capital allocation, providing a late-quarter boost to market sentiment.
Second Quarter Market Dynamics
April represented a dramatic turnaround for the sector, with operating rates surging to their highest levels in three years. This remarkable recovery was driven by a confluence of positive factors:
- Stabilized metal pricing: Ferrous metal prices maintained steady upward momentum, creating confidence among buyers
- Trader psychology: The market exhibited classic "rush to buy amid rising prices, hold back during downturns" behavior
- Inventory optimization: Producers maintained a highly efficient low-inventory circulation model with 7-8 day inventory levels
- Robust order flow: Steel tower and guardrail orders showed particular strength
- Export acceleration: Concerns about potential tariff market impact prompted rushed export activity
This April peak proved short-lived, however, as May and June brought a significant operating rate decline attributed to multiple factors:
- Traditional seasonal slowdown patterns impacted construction activity
- Severe weather disruptions, including unprecedented heavy rainfall and flooding in several regions
- Premature high temperatures in northern production hubs, arriving weeks earlier than historical norms
- Construction sites across multiple regions experiencing significant activity reductions due to weather extremes
The combined impact of these seasonal and weather-related challenges created substantial headwinds for galvanizing enterprises, leading to the downward trend in operating rates that defined late H1 2025.
How Will Galvanizing Demand Trend in H2 2025?
As industry participants look ahead to the second half of 2025, several key indicators suggest the potential for a recovery in galvanizing demand, albeit with important timing considerations and regional variations.
Positive Demand Drivers for H2
The "Supply-side reform 2.0" policy initiatives are gaining significant momentum entering H2 2025. These measures represent the government's enhanced approach to industrial optimization, moving beyond simple capacity cutting to a more sophisticated coordination of production, pricing and market dynamics.
Anti-"rat race" competition policies are providing structural support for steel industry stability. These measures aim to curb destructive price undercutting that has historically undermined sector profitability during demand downturns. The implementation of these policies is expected to create a more sustainable operating environment for galvanizing enterprises.
The National Development and Reform Commission (NDRC) has outlined substantial investment plans focused on several priority areas:
- Implementation of "major national strategies" across infrastructure and industrial sectors
- Building enhanced security capacity in key strategic areas
- Launching large-scale equipment upgrade programs to boost industrial efficiency
- Consumer goods trade-in initiatives designed to stimulate domestic consumption
These policy initiatives are designed to boost investment in new urbanization projects, which typically create significant downstream consumption opportunities for galvanized products across construction, infrastructure, and manufacturing applications.
Quarterly Outlook for H2 2025
The third quarter (July-September) projections suggest initial weakness in galvanizing demand, influenced by:
- Traditional summer consumption off-season patterns
- Continued extreme weather conditions limiting construction activity in multiple regions
- Gradual policy implementation timelines delaying immediate impact
However, industry analysts anticipate a meaningful improvement in operating rates beginning in September, as policy support measures begin taking effect and seasonal construction patterns normalize after the summer slowdown.
For the fourth quarter (October-December), the forecast shows a more complex pattern:
- Operating rates are likely to increase in early Q4, continuing the September momentum
- Policy-driven demand is expected to provide substantial support through mid-quarter
- Traditional seasonal weakening will likely emerge by late November/early December
- Month-over-month declines are anticipated by year-end as winter construction limitations take hold
"With policy support, operating rates are expected to gradually improve in September and October," notes SMM's analysis team, though they caution that "we expect a month-on-month decline at the end of Q4."
What Factors Will Influence Galvanizing Enterprise Performance in H2?
Several interconnected factors will determine how galvanizing enterprises perform during the second half of 2025, with both macroeconomic and industry-specific elements playing crucial roles.
Macroeconomic Influences
Ongoing trade war strategies represent a significant source of market uncertainty, particularly for export-oriented producers. These trade tensions have already altered ordering patterns, with many buyers accelerating purchases in anticipation of potential tariff implementations.
Domestic consumption is receiving multi-perspective support through two primary channels:
- Capital investment initiatives: Government-directed funding for infrastructure and urbanization projects
- Demand-side policies: Consumer incentive programs and purchase subsidies for galvanized products
However, implementation delays remain a persistent challenge. "The implementation speed has been relatively slow," according to SMM analysis, suggesting that "policy effectiveness timeline extends into late 2025" rather than providing immediate relief.
Industry-Specific Considerations
Structural product demand variations are creating a nuanced market landscape:
- Steel tower orders continue to show remarkable strength, maintaining the positive momentum established in April
- New tenders for infrastructure projects are maintaining a consistent release schedule
- Guardrail demand remains robust across transportation infrastructure projects
- Export order dynamics are shifting significantly as buyers and sellers navigate the evolving tariff landscape
Weather-related construction limitations represent another critical factor, with:
- Regional variations in project timelines based on local climate conditions
- Construction companies adopting adaptation strategies to manage changing weather patterns
- Production scheduling adjustments to accommodate regional climate differences
Raw material price stability concerns also loom large for producers, with cost pressures potentially squeezing margins if prices rise while finished product pricing remains constrained by competitive pressures. Current iron ore trends suggest continued volatility may impact input costs for steel producers.
Inventory management strategies continue evolving, with most enterprises maintaining the 7-8 day inventory model that proved successful during April's peak, allowing for rapid response to market changes while minimizing carrying costs.
What Production Strategies Are Galvanizing Enterprises Adopting?
Faced with fluctuating demand conditions, galvanizing enterprises are implementing sophisticated operational strategies to maximize efficiency and market responsiveness.
Operational Adjustments
The low-inventory circulation model has become the industry standard, with leading producers maintaining weekly inventory turnover targeting just 7-8 days of supply. This approach minimizes capital tied up in inventory while ensuring sufficient material to meet customer needs.
Order fulfillment prioritization strategies have evolved to focus on high-margin business segments and reliable long-term customers. This selective approach helps enterprises maintain profitability even during periods of reduced overall demand.
Production scheduling has become increasingly adaptive to demand fluctuations, with:
- Flexible shift arrangements to increase or decrease output
- Maintenance scheduling aligned with anticipated low-demand periods
- Cross-training of personnel to enable rapid production line reconfiguration
These operational adjustments allow enterprises to maintain optimal capacity utilization while reducing fixed costs during inevitable market downturns.
Market Response Mechanisms
Price-sensitive production planning has emerged as a critical strategy, with enterprises closely monitoring raw material costs and finished product pricing to maintain margin integrity. Production volumes are adjusted in near real-time based on pricing signals from both input and output markets.
Export strategy adjustments have become necessary to navigate the complex tariff landscape. Producers are:
- Accelerating shipments when tariff windows are favorable
- Diversifying market destinations to reduce dependence on tariff-affected regions
- Exploring value-added product lines less impacted by basic commodity tariffs
Regional production shifts based on weather patterns have become increasingly common, with enterprises leveraging multi-site operations to redirect production to areas less affected by extreme weather events.
Capacity utilization optimization techniques are being refined, with enterprises identifying the precise production levels that maximize efficiency while minimizing marginal costs during periods of reduced demand. Additionally, some companies are exploring investment opportunities in adjacent sectors to diversify revenue streams.
FAQ: Galvanizing Industry Outlook for H2 2025
Will the traditional September-October demand improvement materialize in 2025?
Based on historical patterns and current policy support mechanisms, demand is expected to gradually improve in September and October 2025. However, the magnitude of this improvement may differ from previous years due to ongoing economic adjustments and the delayed implementation timeline of some policy initiatives.
SMM analysts note that while the traditional seasonal uptick should materialize, it may not reach the intensity of pre-pandemic "golden" periods that characterized earlier market cycles. Construction project backlogs and weather-related delays from H1 could actually extend activity further into Q4 than in typical years.
How are weather patterns affecting galvanizing production schedules?
Extreme weather conditions are forcing significant adaptations in production scheduling across the galvanizing sector. Premature high temperatures in northern production regions have disrupted normal summer production patterns, while increased rainfall in central and southern areas has created unpredictable work stoppages.
Enterprises are responding by implementing more sophisticated weather monitoring systems, creating contingency production plans, and in some cases, temporarily shifting production volumes between facilities in different regions to maintain overall output targets despite localized weather disruptions.
What impact will the "supply-side reform 2.0" have on galvanizing enterprises?
The reform is expected to create a more stable and sustainable operating environment by reducing destructive competition practices that have historically undermined industry profitability. By establishing more coordinated approaches to production and pricing, the reforms aim to maintain reasonable profit margins despite fluctuating demand conditions.
The anti-"rat race" elements of these reforms specifically target the tendency for producers to engage in unsustainable price-cutting during demand downturns, which has previously created boom-bust cycles that damaged long-term industry health. These measures should help stabilize pricing even during seasonal demand variations.
How are export-oriented galvanizing producers navigating tariff challenges?
Export-focused producers are implementing multi-faceted strategies to address tariff uncertainties:
- Accelerating shipments when possible to avoid potential future tariff implementations
- Diversifying market destinations to reduce dependence on any single export region
- Developing value-added product lines that may qualify for different tariff classifications
- Shifting focus toward domestic opportunities where policy support is creating new demand channels
- Establishing more flexible pricing mechanisms in contracts to accommodate tariff-related cost increases
This adaptive approach allows export-oriented producers to maintain market share while managing the financial impact of changing tariff structures across different destination markets. However, US economic pressures continue to create unpredictable market conditions for international trade.
Industry Outlook Disclaimer: The projections and analyses presented in this article are based on current market conditions and policy announcements as of July 2025. Actual outcomes may vary based on policy implementation timing, weather conditions, and global market developments. Readers should consider these factors when making business or investment decisions.
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