Posted on 26 Aug 2021
The steelmaking capacity utilization rate of the 71 independent Chinese electric-arc-furnace (EAF) steelmakers under Mysteel’s regular survey increased for the second straight week by another 1.04 percentage points on week to 61.6% as of August 19, as power supply constraints in the country’s southern regions had eased, encouraging local EAF producers to ramp up production.
Last week, local governments in South China’s Guangdong province eased power controls imposed on local industrial enterprises, and some EAF mills in the province have ramped up production to benefit from the rather healthy margins available on finished steel, Mysteel Global noted.
The hot weather in Guangdong and rapid recovery in industrial production had led to power consumption to peak in summer. Guangdong hosts about 50 EAF mills – managing over 14 million tonnes/year of crude steel capacity, according to Mysteel data – and most of these had been forced to trim production so available power supplies could be prioritized for household use.
“Guangdong’s mills have struggled with power shortages for more than three months (so) their decreasing demand for steel scrap amid the uncertainties of the power control measures saw local scrap prices keep decreasing,” a Shanghai-based market watcher explained. “As a result, the rather low raw material prices ensured that Guangdong’s EAF makers could enjoy relatively high profits of around Yuan 750/tonne ($115.7/t),” she added.
In contrast, the average rebar margin earned among the 18 independent EAF mills across the country monitored by Mysteel was just Yuan 373/t over August 16-20, according to Mysteel’s databases.
But the EAF mills in southern China can’t be entirely free to beef up production, Mysteel Global notes. The determination of the central government to bring down steel output nationwide this year continues to prevent many EAF mills in other areas from ramping up production to the extent they would like and so capitalize on the improved margins.
Source:Mysteel Global
