The continuous uptick in China’s domestic steel prices since July has seen the profit margins that most independent electric-arc-furnace (EAF) producers are earning on their steel keep rising. This is encouraging mills to maintain high production, Mysteel’s latest survey has found.
Recently, domestic steel market sentiment has been bolstered by expectations that steel output for the remainder of 2021 will decrease – a belief that also served to strengthen finished steel prices further.
Mysteel’s assessment shows that as of July 16, China’s national price of the HRB400E 20mm dia rebar had increased for the second week, rising by another Yuan 184/tonne ($28.4/t) on week to refresh its two-month high of Yuan 5,276/t. In parallel, Mysteel’s steel scrap price index had nudged up by a small Yuan 14.9/t on week to Yuan 3,727.5/t, both including the 13% VAT.
Consequently, the price spread between rebar and steel scrap expanded to Yuan 1,534.72/t as of last Friday, higher by Yuan 161.49/t on week.
The widening price spread saw the margins being earned by the 18 independent Chinese EAF mills which Mysteel monitors, improve by another Yuan 117/t on week to average Yuan 223/t.
In tandem, the continuous recovery in the steelmakers’ margins over the past week resulted in a parallel increase in capacity utilization among the domestic EAF producers. Over July 9-15, the capacity utilization rate among the 71 EAF steel mills nationwide which Mysteel regularly surveys rose for the second week by 1.1 percentage points on week to average 67.48%.
“The better profits encouraged us to keep steadily producing,” a Jiangsu-based EAF mill official explained. “And to make sure we can enjoy normal production levels, we have raised our buying prices for scrap with our traders so that we can hopefully seize more scrap materials because these days, scrap availability is relatively tight,” she told Mysteel Global.
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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