Posted on 22 Apr 2024
Steel production among China's electric-arc-furnace (EAF) steel mills fell further during this week as the makers reacted to their persistently negative margins, Mysteel's latest survey showed. However, the EAF mills' losses on steel sales have shrunk significantly, which should encourage some mills to rev up production next week, survey respondents suggested.
During April 12-18, the average capacity utilization rate of the 87 independent EAF mills under Mysteel's regular tracking had dropped for the third straight week by another 1.48 percentage points on week to reach 49.07%, while their operational rates averaged 64.75%, lower by 2.09 percentage points from the prior week.
"Some mills in East and Central China shut off their furnaces this week in response to the losses," a market watcher based in Shanghai said.
"Besides, the recent gains in steel scrap prices had pushed up the production costs of the EAF mills, prompting a few to shorten their operation times and only produce during off-peak periods for electricity consumption," he added.
Though most EAF steelmakers were still losing money when selling their products, they have seen their margins improve because the steady rises in finished steel prices have been faster than the gains in steel scrap prices, Mysteel Global learned.
As of April 18, Mysteel's assessment of China's spot price of HRB400E 20mm dia rebar was Yuan 3,805/tonne ($535.4/t), higher by Yuan 124/t or 3.4% on week, while Mysteel's domestic steel scrap price index was at Yuan 2,859.4/t as of the same day, higher by Yuan 54.5/t or 1.9% on week, both including the 13% VAT.
Also by the same day, the average loss on sales of construction steel suffered by the 35EAF mills under Mysteel's other survey was Yuan 73/t, nearly half the Yuan 135/t they suffered the previous week.
"Given the recovery of profits, domestic EAF mills may not cut production further next week," the Shanghai analyst said.
A few mills in South and Southwest China have already restarted production after maintenance stoppages this week, and domestic EAF production may start to rebound, he believed.
Source:Mysteel Global
