The capacity utilization rate of the 87 independent electric-arc-furnace (EAF) steelmakers across China under Mysteel’s regular survey continued to rise last week, climbing for the eighth straight week by another 1.23 percentage points on week to reach 67.4% as of March 23 a new high since early May 2022. Remaining healthy profit margins persuaded more EAF mills to ramp up production, the survey found.
“Though the retreating downstream demand and precarious market sentiment dampened steel prices recently, the prices of raw materials including steel scrap also fell accordingly, allowing some EAF makers to enjoy healthy margins, and thus giving them confidence in maintaining production,” a Shanghai-based market watcher observed.
For example, China’s national average benchmark price for HRB400 20mm dia rebar under Mysteel’s assessment decreased by Yuan 88/tonne ($12.8/t) on week to Yuan 4,261/t as of March 27, while Mysteel’s steel scrap price index declined too by Yuan 34.2/t on week to Yuan 3,191.3/t, both including the 13% VAT.
Despite the faster decline in steel prices compared to scrap, Mysteel’s other survey on a small sample of 40 independent EAF steelmakers nationwide showed that the surveyed mills could still earn an average of Yuan 56/t when selling rebar. More specifically, these mills were saving a large Yuan 162/t during off-peak hours for power consumption – in the early morning and late evening, according to the survey.
On the other hand, “though downstream steel demand has shown signs of weakening recently, market participants still anticipate a further recovery of steel consumption in the upcoming ‘silver’ April, which has bolstered these days’ futures prices of finished steel and will also encourage domestic EAF mills to keep producing in the next few weeks,” she predicted.
In the derivatives market, the most-traded rebar May contract on the Shanghai Futures Exchange regained its ground from the previous days’ losses, closing the daytime trading session at Yuan 4,105/t on March 27, Yuan 20/t or 0.5% higher from last Friday’s settlement price.
Written by Lindsey Liu, liulingxian@mysteel.com
Edited by Alyssa Ren, rentingting@mysteel.com
Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.
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