SHANGHAI, Mar 18 (SMM) – While profits improved slightly on demand recovery, electric arc furnace (EAF) steelmakers in China recovered much slower than expected, showed the latest SMM survey, as steel scrap supply remained tight.
As of Tuesday March 17, operating rates across EAF steel mills in China stood at 20.3%, up 12.72 percentage points from the beginning of the month (March 3), but much lower than the forecasts of 34%.
Manpower shortages kept some mills from reopening, as they have a high portion of workers from the coronavirus epicentre of Hubei and as some workers remained self-quarantined.
Some mills plan to resume production at the end of this month, but uncertainty lingers as tightness in scrap supply may not ease.
EAF mills in south and southwest China have recovered faster than rivals in the rest of China, with operating rates both rising 14 percentage points from the start of March to 22% and 31%, respectively.
Profits at some of mills in the two regions have recovered to 50-100 yuan/mt following demand recovery and an easing in inventory pressure, especially at southern mills. But operating rates at those mills failed to exceed 50%, due to tight supply and high prices of steel scrap.
EAF mills in south and southwest China recently purchased steel scrap at tax-excluded prices of 2,200-2,300 yuan/mt.
In central China, operating rates across EAF mills remained at around 10%, as manpower and logistics issues kept mills in Hubei from reopening.
Operating rates at EAF mills in east China increased 10 percentage points from the start of this month to 16%, as profits there recovered slower. Some EAF mills there returned back to negative territory after steel scrap prices climbed.
The recovery of EAF steelmakers so far this month is estimated to increase daily crude steel output in China by 40,400 mt. SMM data showed that Chinese EAF steelmakers produced 116 million mt of crude steel last year.
Improving profits and easing inventory pressure are also encouraging blast furnace (BF) steelmakers to recover production, which would be the biggest driver of supply pressure.
