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Operating Rate at Small Steel Processing Plants Rises, and Will Rebar Price Rally after a Slump, SMM Surveys
Apr 13,2017 16:33CST
smm insight
Source:SMM
Operating rate at steel processing plants rose 1% MoM to 51% and that at intermediate frequency furnace plants expanded 7% MoM to 9% as of Apr 12.

SHANGHAI, Apr. 13 (SMM) – SMM surveyed operating rate at 60 of small and medium steel plants and found that operating rate at steel processing plants rose 1% MoM to 51% and that at intermediate frequency furnace plants expanded 7% MoM to 9% as of Apr 12.

Steel processing plants reported stable production as of Apr. 12 after a widespread resumption last month, with rising billet supply. Slim strip and section steel market trading in response to poor downstream demand prompted prices to slide sharply with some even declined below cost, narrowing price gap among those and billet. Some plants thus chose to sell billet rather than process it, increasing billet supply significantly. Moreover, China launched strict environmental checks in Beijing, Tianjin and Hebei and all steel strip plants in Tianjin were called to shut down from Apr. 15, striking billet demand. Most steel processing plants pointed out that rebar price plunged in recent two days but billet price followed to drop, resulting in steady profits at those plants. Surveyed steel processing plants are not likely to expand output with thin trading.

Steel Strip Plants in Tianjin to Shut down on Environmental Protection Inspections

Most intermediate frequency furnace plants shut down after China announced to phase out all low-grade steel capacities by June 30 and only some electric arc furnace plants hold online, which have completed technical reform, but only produced small amounts of goods. According to SMM data model, rebar price is 2,310 yuan per tonne (including tax) at present with average profit above 1,000 yuan per tonne. Some plants may choose to produce slinkingly for high profits. In addition, most intermediate frequency furnace plants, which are under technical reform, will resume output successively. SMM will update it.

Rebar production scheduling at large plants has increased 5.62% MoM in April, growing rebar supply in the month, and downstream demand is expected to increase as it recovers in northern China. Supply and demand seems in balance with rigid demand, despite of thin spot market trading. Besides, price gap between hot-rolled steel and rebar is expected to narrow further, raising steel plants’ negative sentiment. This, combined with tight liquidity, will lead price to dip. Rebar prices may rally after overselling in a near term. However, the price gap widens recently as rebar price decline is lower than that of hot-rolled price. SMM expects rebar price to remain weak with falling hot-rolled price.

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