Healthy profits keep independent EAFs operating at high levels in Aug

SHANGHAI, Aug 9 (SMM) – While surging steel scrap prices have eroded profits, independent electric arc furnaces (EAFs) in China are still operating at high levels as margins remained healthy, SMM research found.

We expect the average operating rate across these EAFs in August to go up further to 74%, up 4 percentage points from July.

As of Wednesday August 8, costs for independent EAF production came in at 3,919 yuan/mt, based on a steel scrap price of 2,280 yuan/mt including tax. Profits stood at 211.1 yuan/mt based on Wanji’s offered price in the Shanghai market, SMM calculation showed.

Scrap prices jumped 260 yuan/mt over the past month as the material benefited from the country’s intensive environmental protection initiatives.

Some mills with independent EAFs told SMM that their margins currently stand at 200 yuan/mt and some have their margins at 270 yuan/mt with a good control of costs. Such margins are considered relatively high, which has kept EAFs operating at high levels.

Mills in Guangxi and Guangdong provinces have also swung back to high gears as environmental probes across the regions wound down. Production at Wantai Steel in Zhejiang province, whose transformer broke down on May 26, has also partially recovered.