WEEKLY: China's EAF output falls further but margins improve

Mysteel Global: Output among Chinese electric-arc-furnace (EAF) steelmakers continues to fall, as the weak demand from steel end-users has forced more mills to reduce or even halt production, Mysteel's latest survey showed. The losses incurred by the mills on steel sales have eased, however.

During December 6-12, average capacity utilization among the 87 domestic EAF mills under Mysteel's regular tracking dropped for the fourth straight week to reach 52.98%, lower by 0.41 percentage point from the previous week.

Meanwhile, the operational rates among these mills averaged 67.32%, losing 0.51 percentage point on week, the survey showed.

A few mini-mills in Northeast China's Liaoning have stopped production to conduct maintenance and will not resume operations until after the Chinese New Year holiday that ends in early February, Mysteel Global learned.

Severe cold and frequent snows in Northeast China have dampened activity in steel-user industries, so local steelmakers have generally slowed their production, Mysteel Global noted.

Nevertheless, China's steel prices posted strong rises this week, bolstered by the central government's latest pledge to boost the domestic economy, as reported. The climb in prices allowed steelmakers across China to enjoy improved margins, Mysteel's survey showed.

By December 12, for example, the national spot price for the HRB400E 20mm diameter rebar was assessed by Mysteel at Yuan 3,526/tonne ($484.5/t) including the 13% VAT, higher by Yuan 58/t or 1.7% on week.

On the same day, the average loss that the 61 independent EAF steel mills under Mysteel's tracking were suffering on selling rebar had declined slightly to Yuan 69/t, smaller than the Yuan 87/t recorded a week earlier.

Moreover, except for those in Northeast China, most mini-mills in the country could earn some profits when selling the products made during off-peak periods for electricity consumption when power costs are lower, the survey found.

Consequently, a few mills in South China ended their maintenance stoppages and restarted production to chase the profits, Mysteel Global learned.

The relatively positive sentiment in the market is likely to prevent the steelmakers from cutting production significantly next week, and the EAF mills' output is likely to stay stable, Mysteel's survey suggests.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.