China: EAF mills lift output despite thinning profits

• Mills expand output as maintenance shutdowns conclude
• Falling rebar prices may dampen production enthusiasm 

Mysteel Global: Production among China’s electric-arc-furnace (EAF) steelmakers continued expanding during the past week as more mills resumed operations after maintenance, Mysteel’s latest survey showed.

During 15-21 May, the average capacity utilisation rate among the 94 independent EAF steel producers Mysteel monitors increased for the second straight week by another 1.3 percentage points on week to 62.1%, while their average operational rate also rose 2.2 percentage points on week to 75.2%.

The growth in mini-mill production picked up in the past week as four mills in the sample had brought idled furnaces back onstream after maintenance stoppages, while no overhauls were started by other makers, Mysteel Global learnt.

This led to an increase of about 5,600 tonnes/day in steel production among the sampled steelmakers, Mysteel’s survey findings showed. However, the mills saw their profit margins shrink rapidly due to the recent decline in steel prices, according to Mysteel’s other survey.

For example, on 21 May, Mysteel assessed China’s national spot price for HRB400E 20mm diameter rebar at RMB 3,435/tonne ($507.8/t), including the 13% VAT, lower by 1.7% on week.

By the same day, the 76 independent EAF mills nationwide under Mysteel’s tracking were suffering an average loss of RMB 9/t on rebar sales, while a week earlier they could make an average profit of RMB 17/t.

Most mini-mills can still make some money when selling products made during the off-peak period for electricity consumption when power costs are lower. However, their enthusiasm for production will likely weaken due to the thin margins, Mysteel’s survey suggests.

In the coming week, a few EAF steelmakers in Southwest China will resume operations after completing equipment overhauls, Mysteel’s survey showed. As such, the overall run rates among domestic mini-mills are expected to rise, the survey findings indicate, though at a slower rate.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.