The profit margins that China’s independent electric-arc-furnace (EAF) steelmakers are earning on their steel retreated last week amid the rises in their production costs and the slight softening of finished steel prices, according to Mysteel’s latest survey.
As of April 23, the margins of the 18 independent EAF mills under Mysteel’s regular survey averaged Yuan 423/tonne ($65.2/t), down Yuan 50/t on week.
In the same week, the production costs of these 18 surveyed mills had increased by Yuan 42/t on week to average Yuan 4,583/t, according to Mysteel’s assessment.
“The domestic steelmakers’ robust scrap demand both for their near-term output and for replenishment ahead of the upcoming Labor Day holiday over May 1-5 caused steel scrap prices to keep moving upward,” a Shanghai-based market watcher said.
However, unlike the fast pace of the scrap price rise, the recent increase in domestic steel prices was slower, Mysteel Global noted.
As of April 23, Mysteel’s steel scrap price index had gained some Yuan 61.8/t on week to reach Yuan 3,413.7/t, while the national average price for HRB 400 20mm dia rebar had increased by a smaller Yuan 41/t on week to Yuan 5,137/t, both including the 13% VAT.
Consequently, as of April 23, the price spread between rebar and steel scrap had narrowed to Yuan 1,724.36/t, down Yuan 25.73/t on week.
However, the retreat in EAF producers’ margins did not dampen their enthusiasm for production – given that their margins are still at a relatively high level – so the ramp-up in production continued.
The capacity utilization rate of the 71 independent EAF steelmakers across China which Mysteel monitors weekly had increased for a ninth straight week as of April 22, ticking up by another 0.79 percentage point on week to 75.37%, or refreshing its new high since January 2019 when the survey was launched.
Written by Lindsey Liu, liulingxian@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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