Posted on 16 Apr 2021
The profit margins that China’s independent electric-arc-furnace (EAF) steelmakers are earning on their steel have kept rising, thanks to the pickup in domestic finished steel prices. Market watchers commented Thursday that their better business is encouraging more mini-mills to beef up output.
As of April 8, the EAF capacity utilization rate among the 71 EAF steel mills nationwide which Mysteel regularly surveys saw a further increase of 1.06 percentage points on week to refresh its new high of 73.22%.
“It very unusual to see domestic EAF capacity use rise to over 70%,” a Shanghai-based market watcher commented. “The rather healthy profit margins that most EAF producers are enjoying, as well as the central government’s encouragement to develop the EAF industry, are giving these mills confidence to ramp up production,” she added.
“Our profit margins when producing rebar have recovered to over Yuan 550/tonne ($84.2/t), (so) we intend to produce as much as we can when we can earn money,” an official from an EAF mill in East China’s Jiangsu province declared.
“Moreover, we are now in ‘silver April’, a traditional peak season for steel consumption, so we are still optimistic about the near-term demand from steel users, as well as being bullish about domestic steel prices,” he added.
As of April 14, Mysteel’s steel scrap price index had only firmed by Yuan 104.3/t from the beginning of this month to reach Yuan 3,353.5/t, while Mysteel’s national average price for HRB 400E 20mm dia rebar increased by Yuan 198/t on week to Yuan 5,100/t, both including the 13% VAT.
Consequently, the price spread between rebar and steel scrap had expanded to Yuan 1,747.9/t as of April 14, up Yuan 80.3/t from March 31, according to Mysteel’s database.
However, the market watcher also warned that the increase in domestic EAF production should be limited, mainly because of the supply tightness in steel scrap.
“The imbalance between domestic steel scrap demand and supply has expanded, as steel mills’ daily scrap consumption has outpaced their daily scrap deliveries,” she said. Some mills have raised their scrap buying prices to attract more deliveries, but this has resulted in only a limited uptick in deliveries, she explained. “We have observed that some steel mills have had to draw down their scrap stocks at hand just to maintain normal production,” she noted.
In tandem, as of April 8, steel scrap stocks at the 61 domestic blast furnace and EAF steel plants under Mysteel’s regular survey had ended their four straight weeks of inclines, reversing down by 205,900 tonnes or 6.3% on week to 3.05 million tonnes.
Source:Mysteel Global
