Growing prices of steel scrap drive steelmakers into losses

SHANGHAI, Jul 24 (SMM) – Steel supplies are unlikely to extend increases in the weeks ahead as rising prices of steel scrap drove some electric arc furnace (EAF) steelmakers with scrap as feedstock into losses, an SMM survey showed on Tuesday July 23. 

As of Tuesday July 23, losses at EAF steelmakers grew to 38.5 yuan/mt, SMM assessed based on steel scrap prices of 2,370 yuan/mt without taxes in Changzhou of Jiangsu province. 

Spot prices of steel scrap have climbed 70-140 yuan/mt across Chinese markets as of Tuesday, compared with the start of July. The cutback-affected Tangshan city and the central, southern regions of China, where most EAF steel mills are located in, saw the steepest increase in steel scrap prices, by 130-140 yuan/mt during the same period.  

EAF steelmakers in the south reported losses of 30-60 yuan/mt as of July 23, with operating rates at lows of 50%-70%. 

However, in south-west China, relatively cheap steel scrap and high prices of rebar ensured margins of 70-100 yuan/mt at producers. Local mills operated at full capacity, SMM learned. 

While on the verge of losses, most steel mills in the east maintained normal operation with an optimistic outlook on steel prices, but ageing equipment drove some mills to cut production. 

In the month to July 23, continued rainfall and heat waves dampened downstream consumption and prevented spot prices of rebar from rising despite better-than-expected macroeconomic data from China.