Posted on 29 Dec 2021
The steelmaking capacity utilization rate of China's 71 independent electric-arc-furnace (EAF) steelmaker under Mysteel's survey hovered low at 44.6% as of December 23, despite nudging up by a tiny 0.06 percentage point on week. Marker sources blamed thinning profit margins among EAF producers and insufficient scrap stocks for the lower run rate.
Some EAF steelmakers are also complaining that recent strengthening steel scrap prices are reducing their profits, Mysteel Global noted.
"If domestic scrap prices continued to move up, we will be at break-even," an official from an independent EAF steelmaker in East China's Jiangsu province lamented Tuesday, pointing out that his mill has to pay more for scrap feeds in order to keep the normal operation of their furnaces, even though it is now the slack season for steel demand, with finished steel prices under pressure.
As of December 27, Mysteel's steel scrap price index decreased by Yuan 111.4/tonne ($17.5/t) on week to reach Yuan 3,576.9/t on delivery and including the 13% VAT. On the same day, China's national average benchmark price for HRB400E 20mm dia rebar decreased Yuan 81/t on week to Yuan 4,796/t including the VAT.
Consequently, the price spread between rebar and steel scrap has narrowed by Yuan 197.15/t on week to Yuan 1,250.9/t, according to Mysteel's assessment. The rapid rise in scrap prices has sprung mainly from the continuing tight supplies of scrap amid the seasonal decline in availability, together with steelmakers' firm demand both for near-term production and replenishment in winter months, as reported.
Apart from thinning profits being earned by Chinese EAF mills, insufficient scrap stocks at some mills had also forced them to reduce production, Mysteel Global noted.
"After Shagang's three rounds of scrap price increments this month, the market scrap buying prices have been pushed higher. And for some small-sized EAF makers, they can't afford such high production costs," a Shanghai-based market analyst observed. "Obviously, traders will deliver scrap to those buyers who can pay more, leaving the small EAF mills no other choice but to cut their output," she added.
Source:Mysteel Global
