Posted on 27 Nov 2023
Healthier profit margins clearly improved the spirits of Chinese electric-arc-furnace (EAF) steelmakers this week, with the mills pushing their furnaces the hardest they're run since April, Mysteel's data shows. During November 17-23, the average capacity utilization rate among the 87 EAF mills under Mysteel's regular tracking rose for the seventh straight week to reach 63.44%, up by a marked 4.23 percentage points on week.
In tandem, the average operational rate among these sampled steelmakers also climbed 1.03 percentage points on week to 74.22% during the latest survey period.
"Thanks to some support from the government's economic stimulus policies, as well as the strong rises in prices of steelmaking raw materials, domestic finished steel product prices have been strengthening in both the spot and derivative markets, feeding renewed optimism among market participants," a market watcher based in Shanghai observed.
For example, as of November 21, China's national spot price of HRB400E 20mm dia rebar was assessed by Mysteel at a seven-month high of Yuan 4,093/tonne ($576.6/t) including the 13% VAT, though by November 23 it had retreated slightly to Yuan 4,068/t.
Meanwhile, EAF steelmakers remain determined to keep their production costs under control, so the increases in domestic steel scrap prices have remained relatively mild, Mysteel Global noted. As of November 23, Mysteel's national steel scrap price index stood at Yuan 2,942.7/t including the 13% VAT, higher by only Yuan 5.6/t on week.
Consequently, profit margins continued to improve among EAF mills. "Most mills can enjoy a profit of more than Yuan 200/t on the sales of finished steel products when producing during off-peak times for electricity," the market watcher pointed out.
"As such, steelmakers generally lifted their production further, and some had already started to produce at full capacity to chase the profits, so domestic EAF production is expected to keep rising next week," he added.
However, "optimism alone cannot support a long-term growth of the prices," he warned, noting that the actual steel demand remains flat, and that room for EAF production to increase will be limited in coming weeks.
Source:Mysteel Global
