Posted on 16 Feb 2022
Despite the Chinese New Year holiday officially ending on Monday last week, most independent electric-arc-furnace (EAF) steelmakers across China have postponed restarting business, as mills continue to struggle to source sufficient steel scrap.
According to Mysteel's survey of 40 independent EAF mills nationwide published last Friday, only six mills had resumed operations, while only another third of them said they planned to return work this week. The half remaining said they planned to postpone their resumption until after the Lantern Festival, which this year falls on February 15.
As of February 10, the capacity utilization rate of 71 independent EAF steelmakers across China under Mysteel's regular survey had hovered low at just 2.64%.
"As finished steel demand from end-users has revived, domestic steel prices are enjoying some support and have increased significantly - which in turn is giving a boost to the EAF producers' profit margins," a Shanghai-based market watcher explained. "However, most EAF makers are still choosing to keep their furnaces switched off as the margins they're earning currently are just offsetting the losses they endured before the (Chinese New Year) holiday," she told Mysteel Global.
On the other hand, the crimp in deliveries of steel scrap to mills is another factor dampening the enthusiasm of EAF-based mills to resume business, Mysteel Global noted.
"Scrap availability is rather limited currently, as some scrap collectors have not fully returned to work either," she commented. "Even though some steelmakers have lifted their procurement prices to a rather high level, they're still having difficulty obtaining sufficient suppliers," she added.
For example, scrap deliveries to the 61 steel mills under Mysteel's survey averaged a relatively low 1,440.8 tonnes/day as of February 10.
Though most EAF mills' operations remain halted, the survey results show that in response to the supply tightness, some mini-mills have started to buy steel scrap in preparation nonetheless, Mysteel Global noted.
An official with a Jiangsu-based EAF mill who only returned to the company on Monday confirmed that its furnace remains cold and quiet. "We've started procuring steel scrap since last week, as we need to first get ready for production," he said.
"I'm not sure when will we be back in normal operation though - it all depends on many things. Not only the scrap stocks we can secure, but also the resurgence of COVID-19 cases in Jiangsu has added uncertainties," he explained.
As of February 14, China's national price of HRB400E 20mm dia rebar had increased by Yuan 118/tonne ($18.6/t) on week to Yuan 5,010/t, and Mysteel's steel scrap price index increased by a smaller Yuan 18.2/t on week to Yuan 3,651.2/t on delivery, both including the 13% VAT, according to the database.
Source:Mysteel Global
