China: EAF steel production keeps rising, but profits shrink

Production among Chinese electric-arc-furnace (EAF) steelmakers continued growing last week as more mills switched on their furnaces after completing maintenance work, though many EAF mills were still suffering losses, Mysteel's survey showed.

The capacity utilization rates among the 87 independent EAF steel mills under Mysteel's regular tracking averaged 54.27% during May 10-16, rising for the fourth straight week by another 2.39 percentage points, while their average operational rate also ended a two-week drop and increased by 4.35 percentage points on week to reach 68.53%.

"Production increased markedly in South, Central, and Northwest China, where many EAF mills resumed operations after maintenance stoppages," a market analyst based in Shanghai said.

However, Chinese EAF steel mills still saw their losses on steel sales expand by Thursday with domestic steel prices losing ground, Mysteel's other survey showed.

As of May 16, for example, China's national price of HRB400E 20mm dia rebar was assessed by Mysteel at Yuan 3,824/tonne ($540.8/t) including the 13% VAT, lower by Yuan 19/t on week.

By the same day, the average loss on the sales of construction steel production incurred by the 35 independent EAF steelmakers under Mysteel's daily tracking was Yuan 106/tonne, larger by Yuan 18/t on week.

"Even on the sales of steel products made during the off-peak period for electricity consumption, most mills in the country were still losing money," the Shanghai analyst pointed out, adding that only a few mills in the country's western regions could make some profits.

"Although many large cities have enhanced their stimulus policies for the property market, steel demand from this sector may not show any growth immediately," the analyst said.

Moreover, with temperatures climbing across the country, the domestic steel market is expected to gradually enter the traditional slack season for steel consumption in the coming weeks, which may further restrict the growth of production among EAF mills, the analyst cautioned.

Note: This article has been written in accordance with an article exchange agreement between MySteel Global and BigMint.