Major electric arc furnace (EAF) steelmakers still have a healthy appetite for steel scrap, especially mills in East and South China, despite the struggle they’re having with narrowing profit margins, Mysteel Global was told on Thursday.
“We can still make some profits though our margins have been squeezed,” an official from an independent EAF steelmaker from East China’s Anhui province lamented. He pointed out that his mill must pay more for its scrap feeds to keep its furnace operating normally, even though the so-called ‘silver October’ of usually firm orders is ending, with domestic steel demand weakening from now on.
The Anhui-based mini-mill would keep operating so long as it can enjoy a “reasonable profit margin” of Yuan 50-80/t ($7-11/t) on its rebars, Mysteel Global was told.
As of October 30, Mysteel’s benchmark scrap pricing index reached Yuan 2,582/tonne on delivery to mills including the 13% VAT, higher by Yuan 5.1/t on week, according to Mysteel’s latest database. The climb in prices has sprung mainly from the continuing tight supplies of scrap amid the seasonal decline in availability, as Mysteel Global reported.
On the same day, China’s national average benchmark price for HRB400 20mm dia rebar increased by Yuan 5/t on day to Yuan 3,840/t including the 13% VAT, but still at a relatively low level.
On Thursday morning, some 15 steelmakers located mostly in East China lifted their steel scrap procuring prices by Yuan 20-40/t, Mysteel Global learned, a rise which a market analyst said showed that these mills aim to attract more scrap deliveries.
Despite the thinner profit margins they’re enduring now, most EAF steelmakers have kept production firm, he explained, which will further strengthen scrap demand. In addition, some mini mills have also purchased scrap materials to build up stocks for winter operations, he noted.
As of October 24, the capacity utilization rate of the 53 independent EAF steelmakers nationwide which Mysteel monitors reached 55%, or around 6.4 percentage points higher on month.
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