Posted on 21 Aug 2023
Capacity utilization among the 87 Chinese electric-arc-furnace (EAF) steelmakers under Mysteel's regular survey increased for the fifth consecutive week during August 11-17 to reach 54.7%, gaining another 2.12 percentage points from the prior week, with mills in Southwest China continuing bringing idled EAFs back on stream, the survey results show.
"More EAF mills (in Southwest China's) Sichuan province restarted or raised their production as the (government mandated) restrictions on electric power consumption had been fully cancelled," a market watcher based in Shanghai explained.
These mills previously reduced their production to ensure that sufficient power was available in the provincial capital, Chengdu, that was hosting the FISU Summer World University Games over July 28-August 8, as reported.
Meanwhile, an EAF mill in East China's Jiangsu province also resumed production after completing maintenance work during the latest survey period, the market watcher added.
On the other hand, some mills in Northwest China shortened their production time due to the widening losses they're incurring on their sales of finished steel products, the survey showed.
"Only mills in North and Northeast China managed to make up part of their losses by clipping their purchase prices of steel scrap," another ferrous analyst in Shanghai said. "Mills in other regions generally saw their margins narrow further," he added.
On August 17, the average loss suffered by the 40 EAF mills under Mysteel's coverage was Yuan 153/tonne ($21.2/t), some Yuan 14/t more than that in the prior week, even though their production costs had dropped overall.
Nevertheless, the losses incurred by these mills are expected to ease next week as domestic steel prices have rebounded following signs of a recovery in steel demand, Mysteel Global noted.
For example, China's national price of HRB400E 20mm dia rebar settled at Yuan 3,766/t including the 13% VAT as of August 17, higher by Yuan 5/t on week, according to Mysteel's assessment.
"This may encourage domestic EAF mills to continue lifting their production next week," the ferrous analyst suggested.
Source:Mysteel Global
