Posted on 19 Jul 2023
The heatwave that has gripped China since late June had led to increasing power consumption as well as weakening downstream steel demand in the country. Therefore, many independent electric-arc-furnace (EAF) steelmakers across the country have maintained their steel production at a low level with some even halting operations during the summer season, Mysteel Global noted.
Over the week of July 7-13, the average capacity utilization rate among the 87 independent EAF producers nationwide under Mysteel's regular survey nudged down for the second straight week by another 0.94 percentage point week to 50.1%.
"Rising temperatures have pushed electricity usage to a rather high level, as households and offices lean on air-conditioner units and fans. As a result, some EAF mills chose to halt production during the peak electricity hours – in the morning and early evening - not only to ensure sufficient power supplies for household use, but also to save some production costs," a Shanghai-based market watcher commented.
Another reason that forces domestic EAF mills to keep low run rates is their recent thinning margins or expanding losses, Mysteel Global noted.
"High temperatures also affected outdoor construction activities and led to listless steel demand from end-users, which weighed on steel prices accordingly. Meanwhile, the summer season also brings with it a seasonal supply tightness in the scrap market.
Consequently, softening steel prices, along with relatively stable scrap prices backed by tight supply, have largely squeezed EAF steelmakers' profit margins or added their losses recently," the market watcher observed.
In tandem, Mysteel's other survey among 40 independent EAF steelmakers nationwide showed that by the end of last week, they were losing a huge Yuan 140/tonne ($19.5/t) on average when producing and selling rebar. Even when producing during off-peak electricity times, these sampled mini mills still lost Yuan 37/t on average, Mysteel Global noted.
Source:Mysteel Global
