The capacity utilization rate of the 71 independent electric-arc-furnace (EAF) steelmakers across China under Mysteel’s regular survey decreased for a second week during June 18-24 to hit a three-month low of 69.32%, according to Mysteel’s latest survey. The recent plunge in finished steel prices is dragging down the profit margins of the EAF producers and prompting them to reduce production, sources said.
The 69.32% run-rate represented an on-week decline of 2.17 percentage points, Mysteel Global noted.
“The traditional off-season for steel demand amid the frequent rains and summer heat has largely dampened end-users’ steel demand and steel market sentiment. Also, the significant decrease in domestic steel prices has largely squeezed the EAF steel mills’ profit margins,” a Shanghai-based observer noted.
As of June 24, the national price of HRB400E 20mm dia rebar had lost Yuan 168/tonne ($26/t) on week to reach a 2.5-month low of Yuan 4,968/t and including the 13% VAT, according to Mysteel’s database.
In tandem, also by June 24, the margins being earned by the 18 independent Chinese EAF mills under Mysteel’s other survey averaged Yuan 74/t, down by a huge Yuan 82/t on week.
The rains and high temperatures are also hampering the collection and sorting of steel scrap, as reported. The scrap supply limitations will lend some support to steel scrap prices and keep them stable, the Shanghai source suggested.
The weakening of finished steel prices while scrap prices stay relatively stable is likely to continue to add pressure to EAF producers’ margins and prompt some to reduce production in the near term, she predicted.
As of June 24, Mysteel’s steel scrap price index was largely stable at Yuan 3,700.8/t on delivery and including the VAT, or down by just Yuan 14.4/t on week, the data shows.
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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