SHANGHAI, Nov 13 (SMM) – Chinese electric arc furnace (EAF) steelmakers appeared to have maintained operations after the new rebar standard took effect on November 1, SMM research found.

SMM estimates operating rates across EAF steelmakers who produce steel products with scrap, rather than iron ore, as feedstock averaged 77% in November, flat from the previous month.

As of Monday November 12, costs for EAF production came in at 4,174 yuan/mt, based on a steel scrap price of 2,640 yuan/mt, including tax. Profits stood at 196 yuan/mt based on Wanji’s offered price in the Shanghai market, SMM calculation showed.

SMM research found that high profits are incentivising most EAF steelmakers to operate in high gear. For large steelmakers, costs for alloy grew by some 200 yuan/mt after the new standard for rebar came into force.

Operating rates across rolling mills that purchase billet to produce rebar are expected to increase by 2 percentage points month on month to 81% in November. While the new standards are estimated to grow costs across those mills by 120-200 yuan/mt, most small mills are operating at full capacity as they have yet to produce rebar under the new requirements.

Supervision of rebar products was not strictly implemented. Some mills told SMM that a stringent enforcement of the new standards will grow losses and potential output cuts.