China's EAF capacity use recovers on improving margins

Posted on 24 November 2021

China's independent electric-arc-furnace (EAF) steel mills saw their run rates recover last week, with capacity utilization among the 71 EAF mills under Mysteel's monitoring reversing up by 2.38 percentage points on week to an average of 53.37% as of November 18. Respondents to Mysteel's latest survey said mini-mills raised output as they are enjoying better profit margins.

 

"Last week, prices of both finished steel and steel scrap continued to show signs of weakening but the EAF steelmakers nonetheless saw their profit margins recover, as the decrease in scrap prices was much larger than that in steel prices," a Shanghai-based market watcher explained.

For example, as of November 19, Mysteel's national price of the HRB400E 20mm dia rebar had fallen by Yuan 123/tonne ($19.3/t) on week to Yuan 4,716/t, while Mysteel's steel scrap price index has contracted by a larger Yuan 205.4/t on week to Yuan 3,213.3/t on delivery, both including the 13% VAT, according to the database.

In tandem, lower raw materials prices saw the average production cost among the 18 independent EAF mills under Mysteel's regular survey decrease by Yuan 236/t on week to average 4,284/t, Consequently, these EAF makers' margins recovered by Yuan 163/t on week to Yuan 377/t on average.

"The slower decrease in finished steel prices recently, as well as tight steel supplies amid the ongoing measures to restrict steel output, helped the domestic steel market sentiment to recover slightly from the extreme panic over late October-early November. Also, the improved profit margins and sufficient (scrap) stocks at hand encouraged some EAF mills to ramp up production last week," she added.

However, for those blast-furnace (BF) mills that consume both steel scrap and iron ore, their demand for scrap remained lukewarm, as iron ore-price declines have furthered compromised the pricing competitiveness of scrap against iron ore, Mysteel Global noted.

For example, by the end of last week, the price advantage of steel scrap against molten iron at steel mills in East China's Jiangsu province sampled by Mysteel widened for the second week by another Yuan 23.7/t on week to Yuan 72.8/t, according to Mysteel's data.

Source : Mysteel Global