The steelmaking capacity utilization rate among the 87 independent Chinese electric-arc-furnace (EAF) steelmakers under Mysteel’s regular survey increased for the third straight week last week, rising by another 25.01% percentage points on week to 48.34% as of February 16, as more EAF makers resumed operations after Chinese New Year, Mysteel Global noted.
“The recent rebound in domestic finished steel prices widened the price spread between rebar and steel scrap and improved the EAF makers’ profit margins as well,” a Shanghai-based market watcher observed. “This encouraged more mini-mills to restart production,” she explained.
For example, as of February 20, China’s average price for HRB400 20mm dia rebar had increased by Yuan 58/tonne ($8.5/t) on week to Yuan 4,269/t, while Mysteel’s scrap price index had eased by a tiny Yuan 5.7/t on week to Yuan 3,195.8/t, both including the 13% VAT.
At the same time, the price spread between rebar and scrap as of the same date had widened to Yuan 1,105.9/t, up Yuan 71.8/t on week, according to Mysteel’s latest survey.
Also, Mysteel’s other survey among 40 EAF mills nationwide showed that by last Thursday these mills could earn Yuan 45/t when selling their rebar.
However, the shortage of steel scrap is preventing many EAF mills from ramping up production to the extent they would like and so capitalize on the improved margins, Mysteel Global noted.
“At the beginning of last week some traders began speeding up their deliveries to mills – after some mills cut their buying prices – for fear of further price declines,” the market watcher said. “Scrap deliveries declined later as the rush of deliveries saw scrap stocks held by some traders become severely limited.”
Moreover, some traders were more willing to deliver their scrap products to BF mills or large-sized EAF mills, as cashflow among such mills is considered more stable and sales to them less risky, Mysteel Global noted.
Though steel demand from users has revived and margins have improved, some mini-mills still struggle to source scrap in sufficient quantities, Mysteel Global notes, preventing them from lifting their output higher.
Written by Lindsey Liu, liulingxian@mysteel.com
Edited by Zhenqi Yang, yangzhenqi@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Leave a Reply