China: EAF output retreats as losses widen

• Scrap prices hold firm w-o-w, but rebar dips 1.6%
• More output cuts likely as steel demand stays soft

Mysteel Global: After a brief uptick in the previous week, the run rates among Chinese electric-arc-furnace (EAF) steel producers retreated again during the week ended 21 August, as sliding finished steel prices deepened losses among mini-mills and curtailed their production enthusiasm, Mysteel’s latest survey showed.

During 15-24 August, the average capacity utilisation rate among the 90 independent EAF steel producers under Mysteel’s tracking dropped by 0.7 percentage points w-o-w to 56.7%, while their operational rate also fell by 0.7 percentage points from the previous week to 75.7%.

In the latest survey week, one mini-mill in Southeast China’s Fujian halted operations to conduct regular maintenance, while another mill in Central China’s Hubei stopped production due to a steel scrap shortage, Mysteel Global learnt. This led to a reduction of some 4,300 tonnes (t)/day in steel output on average among the sampled EAF steelmakers, Mysteel assessed.

Supported by tight supply across the country, domestic steel scrap prices showed stronger resilience when finished steel prices lost ground this week, Mysteel’s other survey showed.

As of 21 August, China’s national steel scrap tags were assessed by Mysteel at RMB 2,360/t ($329/t), largely unchanged from a week earlier, while national prices of HRB400E 20-mm diameter rebar slid by 1.6% w-o-w to RMB 3,342/t ($467/t), including the 13% VAT.

Consequently, the average loss on rebar sales incurred by the 66 independent EAF steelmakers under Mysteel’s tracking was RMB 90/t ($13/t), larger than the RMB 56/t ($8/t) recorded a week earlier.

Due to tepid downstream steel demand, China’s domestic steel prices are likely to weaken further in the short run, continuing to squeeze steelmakers’ profit margins, Mysteel’s survey suggests.

In the coming weeks, more EAF steelmakers are expected to reduce or halt production as many mills saw the orders placed by their customers decrease, Mysteel Global noted.

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