Posted on 28 Jul 2021
The capacity utilization rate of the 71 independent electric-arc-furnace (EAF) steelmakers which Mysteel samples across China reversed down by 2.83 percentage points on week after two weeks of inclines to hit a more than three-month low of 64.65% as of July 22. Despite their improving margins, the latest survey shows some EAF mills reduced their production amid power supply shortages and local government orders to control crude steel output.
China’s central government has mandated that crude steel output this year should be below the level of 2020, as reported, and this demand for lower output is lending support to domestic steel prices. As of July 23, China’s national price of HRB400E 20mm dia rebar under Mysteel’s assessment gained for the fourth week by another Yuan 111/tonne ($17.1/t) on week to Yuan 5,387/t and including the VAT.
Consequently, the increase in steel prices saw the margins earned by the 18 independent Chinese EAF mills which Mysteel monitors, improve for the third week, jumping by another Yuan 93/t on week to average Yuan 316/t.
However, the continuous recovery in the steelmakers’ margins failed to result in a parallel increase in capacity utilization among the domestic EAF produces, as concerns about production cuts made most EAF mills more cautious about ramping up output, Mysteel Global learned from the survey.
On the other hand, last week local authorities in some Southwest China provinces such as Sichuan and Guangxi notified EAF mills that local power supplies were tight. Consequently, many steelmakers have been forced to trim production or even halt operations so available power supplies can be prioritized for household use, according to the survey.
Meanwhile, the recent heavy rain in Central China’s Henan province and East China’s Jiangsu and Zhejiang province also led to a significant decrease in local scrap supply and deliveries. “Some EAF mills had no choice but to reduce production because of their insufficient stocks,” a market watcher commented.
Source:Mysteel Global
