China EAF capacity use rebounds on improved margins

Posted on 20 November 2020

China’s independent electric-arc-furnace (EAF) steel mills saw their capacity utilization recover slightly last week, as the profit margins these EAF steelmakers are enjoying on their output have improved thanks to the strengthening of finished steel prices currently, market watchers commented on Wednesday.

As of November 12, the capacity utilization rate of the 71 independent EAF steelmakers across China which Mysteel monitors weekly had recovered to 58.52%, up 1.45 percentage points on week or 6.14 percentage points on month, Mysteel’s data shows.

“The better profits encouraged us to keep steadily producing,” an official with a Sichuan-based EAF mill in Southwest China told Mysteel Global. “Our gross margins when producing rebar, for example, have increased to around Yuan 300/tonne ($44/t) whereas one month ago, they were only about Yuan 50/t,” he explained. 

Another official with a Guangzhou-based EAF plant in South China’s Guangdong province shared the same view. “We have maintained normal production. At the same time, we plan to raise our buying price for scrap with our traders – which we hope will prompt our suppliers to sell more scrap to us, rather than to the integrated mills.”

Though steel scrap prices have hovered at a relatively high level recently, the pace of the climb has been slower than growth in the price of rebar, Mysteel Global notes.

As of November 17, Mysteel’s steel scrap price index had gained some Yuan 96.3/t on month to reach Yuan 2,684.6/t on delivery. As of the same day, Mysteel’s national average price for HRB 400 20mm dia rebar had also increased by a larger Yuan 316/t on month to Yuan 4,124/t, both including the 13% VAT.

As a result, the price spread between rebar and steel scrap had expanded to Yuan 1,460.2/t as of November 17, higher by Yuan 217.2/t on month, according to Mysteel’s database.

Written by Lindsey Liu, liulingxian@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com

Source : Mysteel Global