SHANGHAI, Jan 10 (SMM) – Operating rates across Chinese electric arc furnace (EAF) steelmakers extended their decline in January as profit margins remained negative. 

 Profits at EAF steelmakers (source: SMM)

SMM assessments showed that the operating rates across EAF steelmakers in China averaged 46% as of January 8, down 22 percentage points from December 25. The average rate edged lower from a five-month high of 69% in early December and stood at 68% as of December 25. 

SMM forecasts the rate to continue to slip to 29% as of January 10. 

Operating rates across Chinese EAF steelmakers (Source: SMM)

Most EAF steelmakers planned to recover production in early February after the Chinese New Year holiday. But the availability of steel scrap and profits will remain a determinant of whether they will resume as scheduled and when the operating rates will return to the pre-holiday level, given current continued tightness of steel scrap supply.

SMM expects operating rates across EAF steel mills to rebound in mid-February as steel scrap providers may not resume supply until February 9. The recovery of operating rates, however, will be capped if steel prices remain subdued in February.