Home / Metal News / Steel & Iron Ore / EAF operating rates to halt rally in May as rising steel scrap prices lift costs
EAF operating rates to halt rally in May as rising steel scrap prices lift costs
May 9, 2020 13:29CST
Source:SMM
Chinese electric arc furnace (EAF) steelmakers operating rates continued to edge higher as of early May, driven by the resumption of producers in central China as the spread of the coronavirus has stalled. However, the rally in operations will be constrained due to a surge in feedstock steel scrap prices. 

SHANGHAI, May 9 (SMM) – Chinese electric arc furnace (EAF) steelmakers operating rates continued to edge higher as of early May, driven by the resumption of producers in central China as the spread of the coronavirus has stalled. However, the rally in operations will be constrained due to a surge in feedstock steel scrap prices. 


As of May 8, operating rates across EAF steel mills in China stood at 65.26%, up 1.8 percentage point from April 15 and up 12.82 percentage points from early April, according to an SMM survey. 


SMM expects the operating rates to stay between 60-65% in May as mounting cost pressure may slow the overall operations at steel plants, while mills in Hubei, the epicentre of the COVID-19 outbreak in China, will further resume production. Some EAF steelmakers in east China have shown signs of a slowdown in operations. 

 

Operating rates across EAF steel mills in China (Source: SMM)


Chinese EAF steel mills have kept running at an average rate above 50% since the beginning of April on the back of rising demand. This bolstered consumption of steel scrap, which together with scrap supply tightness caused by the pandemic, led to a surge in steel scrap prices. 


As of May 8, purchasing prices of steel scrap by Jiangsu Shagang and Rizhao Iron & Steel have climbed by 100-200 yuan/mt from April 30. In Shanghai, spot prices of steel scrap have increased 250 yuan/mt from the lowest level in April, outpacing a rise of 70 yuan/mt in local spot rebar prices, SMM assessed. 


About 90% of EAF steel mills are running near break-even or with marginal profits as they still hold some stockpiles of steel scrap that were bought at lower prices. Some mills managed to increase profits by rolling greater amounts of small-diameter rebar or coiled rebar, which is more profitable than regular-diameter rebar. 


According to SMM data models calculations, EAF steel mills could face an average loss of 26 yuan/mt based on steel scrap prices of 2,140 yuan/mt in Changzhou (excluding taxes) as of May 8. 

 

Operating rates
EAF steelmakers
Steel
Rebar

For queries, please contact Frank LIU at liuxiaolei@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn

Related news