Posted on 10 Apr 2023
The fast decline in finished steel prices against comparatively firm steel scrap prices recently is hurting the profitability of Chinese independent electric-arc-furnace (EAF) steel producers, and some mills begin to suffer losses again after having enjoyed profit margins for over three months, according to Mysteel's latest survey.
"The recent constant rains in many regions of China had disrupted outdoor construction activities, leading to a shrinking steel demand among end-users. This has also weighed on the domestic steel prices," a Shanghai-based market watcher commented.
Nevertheless, the heavy rains also had an influence on the outdoor scrap recycling and processing activities as well as scrap deliveries from traders to mills. The declining scrap availability thus lent some support for domestic scrap prices to stay firm, according to her.
China's national price of HRB400E 20mm dia rebar under Mysteel's tracking, for example, fell by Yuan 96/tonne ($14/t) on week to Yuan 4,179/t as of April 6, while Mysteel's steel scrap price index only retreated by a smaller Yuan 13.6/t on week to Yuan 3,171.3/t on delivery, both including the 13% VAT.
As a result, Mysteel's other survey on 40 EAF steelmakers nationwide found that these sampled mills were losing Yuan 17 on every tonne of rebar they sold in the same week, while in the prior survey week, they could still earn some meager profit margins.
Profit losses, together with the tepid downstream demand, forced some EAF steel mills to cut back production gradually, with the capacity utilization rate of the 87 independent EAF mills across China which Mysteel monitors weekly ending its nine weeks of inclines, down by 1.79 percentage points on week to 66.39% as of April 6.
"We've started to lose money across our entire product catalogue and our inventories are building up," an EAF mill source based in East China told Mysteel Global. "We have already been forced to slow production," he admitted.
Source:Mysteel Global
