China's EAF capacity utilization stable at 57.02%

The steelmaking capacity utilization rate of the 85 independent electric-arc-furnace (EAF) steelmakers across China regularly surveyed by Mysteel remained largely stable last week at 57.02% as of April 7, nudging down by a tiny 0.36 percentage point on week, as some EAF mills had no choice but to control their output to shepherd their relatively low stocks at hand.

"Some domestic EAF steel mills, especially those small-sized mills, had to rein in output last week because their stock was insufficient as the transportation bottlenecks in many regions amid the resurging COVID-19 cases continued to prevent smooth scrap deliveries to these mills," a Shanghai-based market watcher explained.

Apart from those mills without sufficient stocks, other mini-mills across China gradually ramped up production last week, encouraged by strengthening steel prices that helped improve their profit margins, Mysteel Global noted.

"Though scrap prices have been pushed higher recently because of the supply tightness, steel prices have also shown signs of strengthening too - and at a faster pace than the increase in scrap prices - so our margins are getting a boost," an official from an EAF mill in East China's Zhejiang province disclosed.

For example, as of last Friday, the average margin on rebar sales being earned by the 35 independent EAF mills Mysteel tracks regularly recovered from the previous level (of barely breaking even) to reach Yuan 55/tonne ($8.6/t), according to the database.

Another official from a mill in Southwest China also agreed that his mills' profit margins have increased recently. "For now, even though we still lose money when we operate at full capacity, we can make some profits when we produce during off-peak periods," he told Mysteel Global, adding that his plant has chosen to halt EAF operations during peak periods - in the morning and early evening - to reduce production costs.

Written by Lindsey Liu, liulingxian@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.