These days, China’s electric-arc-furnace (EAF) steelmakers are close to just breaking even on their rebars as the persistently high scrap prices are squeezing their profit margins, Mysteel Global has learned.
“We’re barely making any profits now,” an official from an independent EAF steelmaker from South China’s Fujian province lamented Thursday, pointing out that his mill has to pay more for scrap feeds to keep the furnace operating normally, even though now is the slack season for steel demand with the frequent rains and high temperatures crimping sales.
Over the month to July 22, Mysteel’s steel scrap price index had strengthened to a five-month high of Yuan 2,546.8/tonne ($384/t) on delivery and including the 13% VAT, higher by Yuan 71.1/t on month. Also as of Wednesday, China’s national average price for HRB400 20mm dia rebar had edged up by a smaller Yuan 18/t on month to Yuan 3,820/t, also including VAT.
Consequently, the price spread between rebar and steel scrap had narrowed by Yuan 35.5/t on month to Yuan 1,286.8/t as of July 22, according to Mysteel’s database.
The climb in steel scrap prices has resulted mainly from the continuing tight supplies of scrap through the seasonal decline in availability, as Mysteel Global reported.
“Now, we’re being very cautious about the market as it’s really hard to secure more scrap materials from local collectors, even at a higher price,” a steel scrap trader from East China’s Jiangsu province told Mysteel Global.
“Compared with the large steel mills, some small, independent EAF mills are struggling with a more difficult environment, as they are suffering from thinning profits or worse, the pressure of losing money,” a Shanghai-based market watcher commented. Some mini-mills have even been forced to reduce production or halt operations already, he remarked.
As of July 16, the capacity utilization rate of the 71 independent EAF steelmakers nationwide which Mysteel monitors declined by 9.7 percentage points on month to a near three-month low of 52.6%, Mysteel’s data shows.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research.
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