[SMM Analysis] Scrap Procurement Eases; EAF Operating Rate Rises 2.0% in the Period

As of October 13, the operating rate of 50 EAF (electric arc furnace) mills nationwide primarily producing construction steel stood at 37.5%, up 2.0% week-on-week. Capacity utilization came in at 38.04%, up 2.24% from the previous period, while average daily construction steel output reached 84,700 tonnes, up 5,000 tonnes from the previous period.

During the survey period (October 7 – October 13), EAF operations varied slightly across regions. In East China, EAF mills' per-tonne steel profitability stayed above the break-even line, with some mills resuming EAF production in the current period. In South China, mills reported that as hot metal's cost-effectiveness improved, BF mills scaled back their scrap procurement, which in turn eased scrap sourcing for EAF mills. Combined with recent signs of improving profitability, some EAF mills slightly extended their operating hours. Central and Southwest China largely maintained their prior production levels.

Looking ahead, construction steel fundamentals lack a strong driver, and short-term prices may find it hard to move decisively in either direction. Per-tonne steel profitability at EAF mills is expected to fluctuate within a narrow range, with producers largely maintaining their current pace of off-peak/valley-power production.