The steelmaking capacity utilization rate of 85 Chinese independent electric-arc-furnace (EAF) steel mills under Mysteel’s survey retreated from the prior week’s incline by 3.53 percentage points on week to touch a two-month low of 48.66% as of December 22. Market sources blamed persisting margin losses and a shortage of labor among EAF steelmakers for the lower run rate.
“The decline in EAF capacity use was seen among mills in many regions of China including East China’s Jiangsu and South China’s Guangdong,” a Shanghai-based market watcher observed.
“Actually, these EAF mills haven’t run at full capacity for a long time. Instead, many of them chose to keep their capacity use at a low level, so as to avoid further margin losses,” she explained.
Mysteel’s other survey on 40 EAF mills nationwide showed that these mills were still losing Yuan 50/tonne ($7.2/t) on rebar sales as of December 22.
“Our plant can only make marginal profits when we produce during off-peak times for electricity. However, it’s hard for us to maintain normal operations,” an official from an EAF mill in East China’s Jiangsu told Mysteel Global.
“Moreover, many of our employees have been tested positive (for COVID-19) and need to take a rest, which further impacts the production,” he added.
After Beijing’s further optimization to COVID-19 prevention and control measures, it has seen a rapidly increasing number of pandemic cases across the country, interrupting mills’ production as well as transportation of steel and raw materials, as reported.
The persisting losses, plus staffing shortages, have led some EAF mills to consider starting their holiday breaks earlier, when this year’s Chinese New Year holidays are still more than three weeks away, Mysteel Global notes.
Another EAF mill in East China disclosed that it planned to switch off furnaces at the end of this month. In the meantime, an official from a mid-sized EAF mill in Guangdong also told Mysteel Global that his plant would start the holiday break at the beginning of January.
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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