China: EAF mills’ output rises further, losses widen

• Mills raise scrap purchase prices amid tight supply
• But margins fail to rise, as rebar tags fall by RMB 11/t

Mysteel Global: Production among China’s independent electric-arc-furnace (EAF) steelmakers has now risen for 10 weeks straight, with more mills resuming operations after completing maintenance works this week, the findings of Mysteel’s latest survey showed. However, at the same time, the losses incurred by these mills widened, given rising scrap prices and declining rebar tags.

Over 11-17 April, the capacity utilisation rate among the 90 independent EAF mills under Mysteel’s regular tracking averaged 56.3%, higher by 0.6 percentage points from the previous week, while their average operational rate also increased by 1.6 percentage points w-o-w to 75.1%.

During the latest survey period, some mills in Central China’s Hubei, Northwest China’s Gansu, and South China’s Guangdong ended maintenance stoppages and brought their EAFs back on stream, while fewer mills in Hubei halted production to start maintenance.

However, domestic mini-mills saw their losses on steel sales widen, Mysteel’s other survey showed. As of 17 April, the average loss on rebar sales reported by the 66 independent mini-mills nationwide under Mysteel’s tracking was RMB 130/tonne (t) ($17.8/t), much larger than the RMB 95/t recorded a week earlier.

By the same day, China’s national composite steel scrap price was assessed by Mysteel at RMB 2,414/t including the 13% VAT, edging up by RMB 10.6/t w-o-w.

The steelmakers that resumed operations needed to secure sufficient feed materials to maintain production, and in the face of the tight scrap availability in the market, they lifted purchase prices to attract more deliveries from scrap suppliers.

In contrast, China’s finished steel prices failed to follow the uptrend, with the national spot price of HRB400E 20 mm diameter rebars sitting at RMB 3,286/t, including 13% VAT, as of 17 April, down by RMB 11/t w-o-w.

Consequently, EAF steelmakers’ profit margins were squeezed further by the increases in input costs and the decline of their selling prices, market sources observed.

The large losses on steel sales could prompt some EAF makers to re-examine their production plans – especially those that have rushed to bring furnaces back on stream after maintenance stoppages. Alternatively, they may continue producing at current levels but reduce or halt operations before the official start of China’s May Day string of public holidays over 1-5 May.

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