China’s independent electric-arc-furnace (EAF) steel mills saw their capacity utilization recover slightly last week, according to Mysteel’s’ latest survey. The profit margins these EAF producers are enjoying on their output had improved, thanks to the recovery of finished steel prices recently.
As of July 8, the capacity utilization rate of the 71 EAF mills under Mysteel’s other monitoring reversed up after three weeks of declines, rising by an albeit tiny 0.81 percentage point on week to 66.38%.
“After the celebrations in Beijing on July 1, demand for steel has shown signs of recovery, which in turn has boosted domestic steel market sentiment and strengthened domestic steel prices,” a Shanghai-based market watcher commented. The uptick in profits from the increase in steel prices encouraged some EAF mills to keep steadily producing, Mysteel Global noted.
As of July 9, Mysteel’s assessment of the national price of HRB400E 20mm dia rebar, for example, reversed up by Yuan 150/tonne ($23.1/t) on week to Yuan 5,092/t, while the steel scrap price assessment remained largely stable at Yuan 3,712.6/t, nudging up by a smaller Yuan 10.4/t on week, both including the 13% VAT.
Consequently, the margins being earned by the 18 independent Chinese EAF mills under Mysteel’s regular survey averaged Yuan 106/t, up Yuan 73/t on week.
However, heavy rains and high temperatures across most parts of China continue to affect the collection, processing and delivery of scrap to steelworks, with the result that the scrap supply tightness will help scrap prices to stay strong.
On the other hand, actual steel demand will also be affected during the summer season and is likely to weaken steel prices in the near term. Consequently, any increase in the country’s EAF capacity use may be limited, the survey results indicated.
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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