SHANGHAI, Mar 4 (SMM) – Operating rates across electrical arc furnace (EAF) steelmakers in China remained capped by substantial losses as of March 3, as the coronavirus outbreak weighed on spot rebar prices and delayed the recovery of demand, but the rates were slightly higher than February when nearly all EAF steel mills kept shuttered and drove the overall operating rates close to 0%.
SMM data showed that the operating rates across EAF steel plants in China stood at 7.58% as of March 3. About 40.7% of the suspended producers planned to resume operations in mid-March, but raw materials shortage and limited profits may constrain their production to less than half of the normal levels.
Operating rates of EAF steelmakers in China (Source: SMM)
Chinese government encouraged the orderly resumption of industrial production and announced that 5% of discount will be applied to electricity prices for industry use between February 1 and June 30. This reduced production costs of some steel mills and could account for the pickup in operating rates from a month earlier.
However, EAF steelmakers in most regions remained under pressure of heavy losses. As of March 3, the average loss at EAF steel mills stood at 362 yuan/mt, SMM calculated based on steel scrap prices of 2,240 yuan/mt (excluding taxes) in Changzhou. Most EAF steelmakers in east China reported losses around 300 yuan/mt, while producers in the south-west and south China saw smaller losses.
EAF steel plants also faced difficulties in securing feedstock steel scrap as most scrap processing companies had not returned and producers of home appliances and cars, the upstream of the steel scarp sector, only recovered operations in recent weeks.
Absence of full recovery of downstream demand kept in-plant inventories of construction steel rebar at the highest level on record, showed SMM data, which also depressed any rebound in the operating rates of EAF steel mills.
According to SMM assessments, the national average spot prices of rebar have declined 277 yuan/mt from the pre-holiday level (January 23) to stand at 3,572.4 yuan/mt as of March 3.