China's EAF production retreats further

Production among Chinese electric-arc-furnace (EAF) steelmakers continued to decline last week, as more mills shortened their working hours to avoid losing more money on their operations, Mysteel's latest survey showed.

During 21-27 June, capacity utilisation among the 87 independent EAF steel mills under Mysteel's regular tracking averaged 51.37%, falling for the second straight week and by another 2.36 percentage points from the previous week.

"The prolonged rains across many regions in China curbed production among steel end-users and caused domestic steel prices to keep falling," a market analyst based in Shanghai said. "The serous losses on steel sales led more and more EAF mills to reduce production," he added.

As of 28 June, the average loss on selling construction steel products suffered by the 62 EAF steel producers under Mysteel's other survey stood at yuan 212/tonne (t) ($29.2/t), larger by yuan 26/t from that recorded a week earlier.

"The decline in ferrous scrap prices was slower than that in finished steel prices since scrap availability is still tight nationwide," the Shanghai analyst noted. "As such, the mills' losses expanded, even though their production costs eased," he noted.

Nevertheless, the average operational rate among the 87 EAF mills Mysteel tracks stayed unchanged on week at 70.4% during 21-27 June as East China saw more new capacity commence production last week, the survey showed.

Some mills in East China's Zhejiang completed their 'capacity swap' procedures which allowed them to bring their new EAFs into production early last week, though their operations were still at the running-in stage, Mysteel Global learned.

As for this week, more mini-mill furnaces in East China are scheduled to be turned off for maintenance, according to Mysteel's survey. "This means that overall production and operational rates among domestic EAF mills will likely contract further," the Shanghai analyst suggested.

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