Posted on 16 Jun 2022
Average capacity utilization among the 85 independent electric-arc-furnace (EAF) steelmakers across China under Mysteel's regular survey decreased for the fifth straight week during June 3-9 to hit a near four-month low of 51.57%, according to Mysteel's latest survey. The recent fluctuations in finished steel prices when scrap prices remain generally stable are squeezing the profit margins of EAF producers and further prompting them to maintain low production.
The 51.57% run-rate represented an on-week decline of 2.81 percentage points, and a much larger decline of 31.86 percentage points on-year, Mysteel Global noted.
Besides the country's ongoing rainy season, a Shanghai-based market watcher also blamed last week's annual college entrance exam – where a record 11.9 million senior high school students competed nationwide – for softening steel demand.
As is customary for the crucial exam, out of courtesy for students all activities around exam venues likely to cause noise – including work on construction sites – are stopped for the two-to-three-day test, Mysteel Global notes, an abatement which disrupted steel purchasing last week and so dented prices.
As of June 10, the national price of HRB400E 20mm dia rebar had lost Yuan 10/tonne ($1.5/t) from June 2 to reach Yuan 4,821/t and including the 13% VAT.
On the other hand, the rainy weather and high temperatures are also hampering the collection and sorting of steel scrap, with the consequent supply limitations lending some support for scrap prices and keeping them stable. Mysteel's steel scrap price index increased by Yuan 22.2/t on week to Yuan 3,789/t and including the VAT, according to the database.
In tandem, softening steel prices when scrap prices are marginally increasing saw some 40 EAF steel mills sampled in another Mysteel survey admitting that as of last Thursday, they were still losing Yuan 103/t when selling their rebar.
Moreover, market participants also predicted that output among domestic EAF makers is unlikely to improve much in the near term. "The rainy season starting in East and South China may dampen domestic steel consumption further and keep weighing on steel prices," the Shanghai market watcher commented.
Source:Mysteel Global
