Average capacity utilization among the 85 independent electric-arc-furnace (EAF) steelmakers across China under Mysteel’s regular survey had decreased for the second straight week as of October 13, slipping by another 2.13 percentage points on week to 46.1%, a new low since early September. Behind the decrease was the reduction in output among most steelmakers in response to thinning margins and even losses, survey respondents said.
The EAF capacity utilization rate was also lower by 8.21 percentage points from the same period last year, according to Mysteel’s assessment.
Some Chinese EAF mills chose to halt their operations for the National Day holiday break over October 1-7, anticipating a recovery in steel demand in the remainder of this month, sources suggested. But after the break, hopes for an uptick in steel sales have faded, cooling the sentiment of Chinese steel-sector players and discouraging them from further steel purchases, according to a Shanghai-based market watcher.
This had weighed on finished steel prices, which in turn squeezed the profit margins of the country’s independent EAF makers and even causing them losses, she explained.
As of October 17, China’s national price of HRB400 20mm dia rebar, for example, had lost another Yuan 101/tonne ($14/t) on week to reach Yuan 4,100/t, while Mysteel’s steel scrap price index had decreased too by Yuan 103.4/t on week to Yuan 3,020.8/t on delivery, both including the 13% VAT.
In tandem, Mysteel’s other survey among 40 EAF steel mills nationwide showed that as of last Thursday, the mills were losing Yuan 83/t when producing and selling rebar.
However, by last week EAF steel mills in South China had finally begun to earn a little money, with average profit margins among local mini-mills recovering from weeks of losses to reach Yuan 89/t, another market watcher in South China’s Guangdong observed.
“Yet despite their improving margins, most local EAF makers continued to maintain low production, showing they had no inclination to ramp up production immediately because their steel sales have been patchy and stocks of finished steel at hand are relatively high,” she explained.
Written by Lindsey Liu, liulingxian@mysteel.com
Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.
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