Mysteel’s latest weekly survey showed that scrap stocks at the 61 Chinese electric-arc-furnace (EAF) and blast furnace (BF) producers swelled for five successive weeks to its seven-month high of around 3 million tonnes as of December 5, as BF mills are especially keen to stock up inventories amid high steel margins despite recent domestic steel price volatility.
As of December 5, the average capacity utilization among China’s 53 independent EAF steelmakers under Mysteel’s survey increased for the fourth week by another 9.6 percentage points on month to a four-month high of 62.06%, which, however, was far lower than the 80.94% BF capacity utilization rate among the 247 BF mills across China or a nearly three-month high for them.
“At present, many Chinese steel plants are stocking up some more scrap,” a Shanghai-based market analyst commented, as “the profit margin at these steelmakers (especially BF producers) remained relatively high, which has encouraged them to raise production,” she explained.
China’s EAF steelmakers are enjoying an average profit margin of Yuan 150-200/tonne ($21-29/t) for rebar, while margin for BF mills was much higher at around Yuan 500/t, according to market sources.
Restrictions on steel mills especially those in the key steelmaking provinces in Hebei in North China, East China’s Shandong and Jiangsu province, have also prompted steel mills especially for BF producers to consume more scrap in daily operation, and as December 5, the daily consumption of steel scrap at 61 EAF and BF producers with the majority being BF mills increased by 2.6% on month to 3,089 tonnes/day, according to Mysteel’s latest available data.
In the near term, domestic steel scrap supply may stay high if steel margins persist at a satisfying level, as iron ore prices have been strengthening considerably, Mysteel Global notes.
As of December 11, China’s 62% portside iron ore index dropping by Yuan 16.2/wmt on month to Yuan 94.5/wmt FOT Qingdao and including the 13% VAT, Mysteel’s data shows.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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