[SMM Electric Arc Furnace Operating Rate] Concerns Arise from Production Standard Change, Electric Arc Furnace Operating Rate Declines Again

During the survey period (July 17-23), the market prices fluctuated and declined. In terms of spot goods, frequent high-temperature warnings made it difficult for downstream construction to shake off the impact of the weather, and demand remained insufficient. Additionally, the recent switch between the new and old national standards, with steel mills announcing new standard production notices, triggered market concerns about the digestion of old standard resources. Under the influence of sentiment, spot prices fell rapidly, and steel mill losses expanded. In the week, the operating rate of electric arc furnaces dropped again to 26.18%.

By region, in east China, the accumulation of old standard resources and the switch to new standards have raised market concerns about the clearance of old standards. The large volume of futures and spot transactions in the region, coupled with strong correlation with the market, has led to a sharp drop in spot prices due to sentiment impact. Additionally, steel mills have faced obstacles in collecting steel scrap, leading to continuous production losses and a further decline in the operating rate this period. In south China, production had already decreased due to the earlier rainy season. With improved weather, demand has somewhat recovered, and inventory has continued to decrease, resulting in minimal overall inventory pressure. However, steel mills remain in a loss-making state and are mostly maintaining low operating rate. In central China, overall demand is poor, electric arc furnace-based steel mills continue to incur losses, and the operating rate has dropped to a low level. In southwest China, continuous rainfall in Sichuan has affected both the production and transportation of steel scrap, making it difficult for steel mills to collect scrap. Coupled with poor demand for finished products, the operating rate of steel mills in southwest China has slightly declined this period.

Looking ahead, on the macro side, the conference ended without releasing effective positive signals. On the industrial side, due to the transition between old and new national standards and poor rebar profits, the output of both blast furnaces and electric arc furnace-based steel mills has recently declined. The impact of high temperatures and the rainy season remains, and the weak supply and demand pattern is expected to continue in the short term. For electric arc furnaces, under the influence of weather, the recycling, processing, transportation, and loading and unloading of steel scrap are all affected, making steel scrap supply tight. Downstream demand has not improved, and the loss situation of steel mills is likely to persist in the short term, with the operating rate expected to decline slightly again in the next period.