SHANGHAI, Dec 26 (SMM) – Operating rates across Chinese electric arc furnace (EAF) steelmakers declined as of December 25 as losses resurfaced on the back of weakening rebar prices.
As of December 25, operating rates across EAF steelmakers in China averaged 68%, down 1 percentage point from the start of the month, SMM data showed. The average rate hit a five-month high in early December.
Operating rates across Chinese EAF steelmakers (Source: SMM)
Spot prices of rebar have declined since late November when regional shortage eased. SMM assessments indicated that the national average prices of spot rebar have slipped 446 yuan/mt as of December 25, from a one-year peak of 4,303 yuan/mt struck on November 26.
The cumulative decline in South China stood as high as 800 yuan/mt, driving local EAF steel mills into losses of 157 yuan for producing per mt of rebar, SMM calculated as of December 25 based on tax-included prices of steel scrap at 2,550 yuan/mt.
*Note: The mark E refers to earthquake resistance rebar.
Most Chinese steelmakers reported steep declines in profits, which have pushed them to the verge of losses.
As relatively lower prices resulted in heavier losses in East China’s markets, local steel mills have considered taking a holiday earlier than usual on January 3, compared with the scheduled January 10-15 at steel plants in other regions.
SMM learned that spot rebar of third-tier brands is currently priced at low levels of 3,640-3,650 yuan/mt in Shanghai.
Lower supply amid losses will likely slow the pace of accumulation in rebar inventories before and after the Chinese New Year holiday than the same period a year earlier, SMM expects.
Spot rebar prices in North China will be underpinned as they are already at low levels, but prices in South China will continue to face downward pressure with an inflow of cargoes.
Rebar prices and EAF steelmaker profits (Unit: yuan/mt, source: SMM)
