WEEKLY NEWS: China's Electric Furnace Operating Rates Fall as Losses Continue

Prolonged negative margins continue to weigh on China’s electric arc furnace (EAF) steelmakers, forcing more mills to reduce output or suspend operations, according to Mysteel’s latest survey of industry operating rates.

The average capacity utilization rate of 90 independent EAF steelmakers tracked by Mysteel fell by 2.2 percentage points from the previous week to 54.5%, the lowest in three months, during the period from June 13 to 19. Meanwhile, the average operating rate of these mills also fell by 3.1 percentage points to 70.9%.

Several small mills in Guangdong, Yunnan and Guizhou (South and Southwest China) have been shut down for maintenance this week, reducing the average daily output of surveyed mills by 2,200 tonnes, according to data from Mysteel.

Meanwhile, mills that had started maintenance earlier have yet to resume production, Mysteel said.

On the other hand, weak domestic steel prices have caused EAF mills to continue to suffer heavy losses this week, forcing many to shorten their working hours, according to another survey by Mysteel.

As of June 19, Mysteel recorded the price of HRB400E 20mm diameter rebar in the Chinese domestic market at 3,218 yuan/ton (equivalent to 447.7 USD/ton, including 13% VAT), down 13 yuan/ton compared to the previous week.

Also as of this time, 66 independent EAF mills monitored by Mysteel recorded an average loss per ton of rebar of 126 yuan, up slightly from 122 yuan/ton last week.

Mysteel's survey forecasts that the output of domestic EAF mills will continue to decline in the coming time, due to increasingly scarce scrap supply, while steel demand gradually weakens due to the impact of the peak summer heat.

In fact, several mills in Fujian province (East China) are planning to shut down for maintenance next week, which could cut local steel output by an average of 3,000 tonnes/day, according to Mysteel.

Source: Mysteel