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[SMM thread analysis] Arc furnace plant has entered a loss "quagmire", and the willingness to reduce production has been expanded.
Jul 29,2019 18:17CST
The content below was translated by Tencent automatically for reference.

Since July, with the rise in scrap prices, steel prices fluctuated downward, electric furnace factory profits sharply compressed. Since the middle of July, the electric furnace plant in South China has entered the stage of loss. Today, electric furnace factories in various places have entered the ranks of losses one after another. According to the SMM data model, according to the scrap price of 2370 yuan / ton Changzhou non-tax scrap calculation, as of today, the electric furnace plant ton steel loss of 78. 5 yuan / ton. According to SMM research, there are still regional differences in the profits of electric furnace plants, the overall situation is still not ideal, and the willingness to reduce production is enhanced. From a specific point of view,

Southwest region: because the scrap price is relatively low, and the steel price is relatively high, so at present in the cost line, has not yet reduced production, the start-up rate to maintain full production. However, the recent continuous rainfall in southwest China suppresses the demand, the follow-up is not optimistic, so there is a willingness to reduce production.

East China: the whole East China Electric Furnace Factory is in the state of capital preservation, the main reason is that although the thread has lost 30 to 50 yuan / ton, but the slightly higher price of wire and small specifications of building materials can hedge thread loss, so that the furnace factory capital preservation production, in addition, production reduction still has expenditure costs, so as of today there is no production reduction.

Central China: most of the electric furnace plants are on the verge of profit and loss. According to SMM, the operating rate in central China has been reduced since the beginning of the month. Production has not resumed this month, and the current operating rate is 50 to 70 per cent.

South China: some electric furnace plants in South China are in a state of long-term loss, with a loss of about 60 yuan per ton of steel. Due to the continuous reduction of production, the operating rate has been maintained at 50 to 70 percent, and there is no plan to resume production.

Generally speaking, the profit of the electric furnace factory is not ideal, but because there are still expenses during the production reduction period, in addition to the electric furnace plant which has reduced production for a long time, other electric furnace plants have lost money, but the production has not yet been reduced. However, at present, at the end of the month, some electric furnace plants have not yet made a plan, do not rule out the subsequent release of the production reduction plan.

The specific research situation is as follows

Steel mill A (southwest region): so far thread loss of 30 to 50 yuan / ton, however, small building materials and wire have cost advantage and the price is higher than thread, as a whole in the state of capital preservation. In addition, preparations have begun to reduce production plans, if the later steel prices do not improve, will begin to implement.

Steel mill B (southwest): the current profit is meagre, close to the cost line, and is currently full of production. However, it is not optimistic at a later stage, mainly due to the continued curbing of demand by Rain Water, coupled with the competition for supplies in other cities this year.

Steel mill C (East China): currently on the brink of profit and loss, the recent demand is not good, but there are still costs to reduce production, so it will not reduce production for the time being, the current 24-hour production.

Steel mill D (East China): thread loss of 30 to 50 yuan / ton, due to production reduction still have to pay other costs (such as employee placement costs, etc.), coupled with the disk snail is still profitable, so production has not been reduced.

Steel mill E (East China): although thread loss, but disk snail profit, overall capital preservation, a small reduction in production, the current production of 16 hours per day. The full birth time is 22 to 24 hours per day.

Steel mill F (Central China): at the cost line, it has been in production of 50% (12 hours) since July, and there is no plan to resume production during July.

Steel mill G (South China): the operating rate has been maintained at 50% since July. There is no willingness to return to production in the follow-up.


Spot market

Today is the end of July, but the market expects other production restrictions have not yet been released, the market is disappointed. Prices across the country generally fell by 20 to 50 yuan per ton. The transaction situation is mainly wait-and-see, and the shipping situation is not satisfactory.

Shanghai market: Shanghai today fell 20 yuan / ton, Shagang quoted price of 3930 yuan / ton. The overall transaction is weak, the market is mainly wait-and-see.

Hangzhou market: today Hangzhou fell 40 yuan / ton, Shagang quoted price of 3990 yuan / ton, down 30 yuan / ton in the morning, but the transaction is general, in the afternoon with the futures market continued to fall. The overall transaction is general

Beijing market: today, Beijing fell 40 yuan / ton, Hegang quoted price of 3840 yuan / ton, the overall transaction is not satisfactory.

Guangzhou market: today, Guangzhou fell 10 yuan / ton, cold steel quoted price of 4150 yuan / ton, although the price fluctuation is not great, but the shipping situation is not ideal.


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