Posted on 25 Jan 2021
With this year’s Chinese New Year (CNY) holiday only three weeks away, many domestic electric-arc-furnace (EAF) steel producers in China have begun arranging their holiday production schedules, and the early plans seen by Mysteel Global indicate that mill managements are divided in their strategies.
Some mini-mills plan to halt production ahead of the February 11-17 holiday, while others seem keen to keep producing over the break, Mysteel Global notes, and the decision about whether to halt ops for the holiday or to stay open throughout has largely depend on the mills’ levels of scrap stocks.
“Apart from EAF mills in northern parts of China, some other EAF mills plan to close for the holidays from January 31, which is later than last year, as the margins that steelmakers are earning this year are better than at this time last year,” a Shanghai-based market watcher told Mysteel Global.
“Also, in response to the central government’s suggestion that people don’t return to their hometowns this year – to stop the spread of the resurging coronavirus – some mini-mills, especially those in East China, plan to maintain normal production over the CNY holidays,” she added.
An official from an EAF mill in South China’s Guangdong province said his plant had accumulated sufficient scrap stocks for production, so output will not be affected by the limited availability of scrap across China at the moment. “However, as most of our employees are from other provinces, we plan to switch off our EAFs from the beginning of February, so as to ensure that our employees can leave early and avoid the public transport congestion,” he told Mysteel Global.
Unlike this mill, an official from another EAF plant in East China’s Jiangsu province said his works would stay producing over the break. “To reduce the risk of the spread of COVID-19 cases, the Jiangsu government is considering providing certain cash incentives for people who choose to stay rather than leave. Therefore, we don’t plan to halt production over the CNY holiday. In fact, we are still trying to secure more scrap materials for production, as we can still earn Yuan 50-100/tonne ($7.7-15.5/t) of profits on rebar sales,” he said.
However, in northern areas of China where the pandemic situation is much more serious, EAF mills already plan to halt production, perhaps within the next few days.
“Due to the more rigorous testing for the virus and slower logistics, our stocking process for scrap is being severely delayed and our inventories are far lower than expected. Though we have tried our best to secure more scrap, our scrap deliveries these days can only just meet our daily consumption,” admitted an official from an EAF mill in North China’s Hebei province. The mill’s scrap stocks are only sufficient to meet around four days of steel production at the present daily usage rate, he told Mysteel Global.
“In addition, our freight costs for delivering finished steel have also increased from Yuan 40-50/t in early January to Yuan 80-100/t currently. In view of the additional production costs and our limited scrap stocks, we plan to switch off our EAFs once our scrap is used up,” he commented, adding that due to the uncertainties surrounding the COVID-19 situation, he was unsure about when his company might resume work after the break.
As of January 14, the capacity utilization rate of the 71 independent EAF mills across China had increased by 2.17 percentage points on week to 63.15%, according to Mysteel's latest survey.
Source:Mysteel Global
