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[SMM thread] scrap price "straight up", the operating rate of electric arc furnace does not decrease but increase!
May 8,2020 20:31CST
translation
Source:SMM
The content below was translated by Tencent automatically for reference.

 

May 8, SMM Iron and Steel:

According to SMM, as of May 8, the operating rate of EAF steel plants reached 65.26%, up 12.82% from the beginning of April (52.69%) and 1.8% from mid-April. The increment mainly comes from the resumption of production of electric furnace plants in central China.

Figure 1: the trend of operating rate of electric arc furnace steel plant from 2019 to now

 

Source: SMM

After the recovery of the demand side, the operating rate of electric furnace plants has risen sharply, maintaining a level of more than 50% since April. The demand for scrap steel is booming, and the supply side continues to be tight under the influence of the epidemic, leading to a sharp rise in scrap prices since April. It is understood that only May 1 so far, Shagang, Rizhao and other steel mills scrap purchase prices have been raised one after another about 100-200 yuan / ton. However, at a time when costs have risen sharply and profits have shrunk significantly, the operating rate of electric arc furnaces across the country has increased instead of falling. The main reasons are:

First, there has been a marked rise in the operating rate in central China. According to research, as the epidemic has been very effectively controlled, as of May 8, the operating rate of electric furnace plants in central China has risen sharply by 14%, driving the overall operating rate upward.

Second, most steel mills say they are not profitable but have not lost a lot of money. According to the calculation of SMM data statistical model, as of May 8, according to 2140 of Changzhou tax-free scrap price, the current EAF steel plant has a loss of 26 yuan per ton of thread steel. In terms of the actual situation, about 90% of the electric arc furnace steel plants indicate that they are still in a state of capital preservation or low profit at present-some electric furnace plants still maintain scrap inventory at low prices in the early stage, and the cost is lower than the accounting situation; some electric furnace plants increase benefits by rolling small size threads or disk screws.

Table 1: comparison of recent changes in scrap prices and spot screw prices

Source: SMM

In the later stage, the operating rate of electric furnace plants in Hubei will continue to rise slowly. However, under the circumstances that scrap prices remain strong and procurement difficulties have become increasingly prominent, the overall operating rate of electric arc furnace steel mills is difficult to continue to rise, and there is even the possibility of a slight decline (some electric furnace plants in eastern China have already shown signs of a slight reduction in production). The operating rate of electric furnace plants is expected to remain at around 60 per cent in May.

[subregional]

East China: the operating rate fell by 2% to 56% from 58% at the beginning of April.

On behalf of steel mill A: at present, the purchase price of scrap has gone up by 100-150 yuan / ton, and the spot price has increased by about 50-80 yuan / ton. Production can only preserve capital, plus scrap is not very easy to purchase, so production has been reduced to about 50% since May 1.

Central China: the operating rate increased by 14% to 49% from 35% in the previous period. The operating rate of electric furnace plants in Henan is basically stable, but because Hubei has just been unsealed, coupled with the slow improvement of demand, the operating rate has rebounded obviously.

On behalf of steel mill B: start about 40%. Production has been shut down for more than three months. Funds and personnel, ah, are under a certain amount of pressure. They are still in a state of loss, but work has already started.

South China: the operating rate rebounded by 3% to about 64%.

On behalf of the steel mill C: at present, there is still a small profit of dozens of yuan, the shipping situation is also very good, and it has been in a state of full production for a long time.

Southwest: the operating rate has dropped by about 3%.

On behalf of the steel mill D: due to the scrap is not very good procurement, the factory raw material inventory is not enough, the current production status is not very stable.

 

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For more information, please contact SMM Iron and Steel Division: Lu Qingping Tel: 021 Murray 51595781

 

 

 

Output
operating rate

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