Blast furnace operating rates in China rebounded slightly, price repression to be limited

SHANGHAI, Jul 17 (SMM) – Operating rates of blast furnaces at Chinese steelmakers increased over the third week of July, rising 0.19 percentage point from a week ago to an average 90.29%, showed an SMM survey. The increment comes from the end of maintenance in some of the steel mills. It is estimated that the operating rates will remain stable next week.

The stock market has seen some adjustments after a sharp rise over the week. Technology stocks which saw a large increase have suffered a heavy setback, combined with the outflow of northward capital has weakened market sentiment.

Demand was softer this week amid heavy rainfall across many cities, and the trading volume has dropped to below 200,000 mt for two days. However, in central China where maintenance was relatively concentrated last week, the pressure on factories has slightly eased and production was resumed. Operating rate of EAF has risen slightly by 0.76 percentage point, and the basic fundamentals of finished products have weakened. 

Report of a confirmed case of COVID-19 at an importing vessel with iron ore at Lianyungang port has raised concerns of stricter port inspections. This supported iron ore prices and may further push up steel prices. Therefore, although the supply has rebounded, it is not appropriate to be too bearish on the current market.

Blast furnace operating rates in China rebounded slightly (Source: SMM)

Details of the SMM survey:

A steelmaker in east China said that inventory levels are high in the local market and demand is not strong due to the heavy rain, the situation is unlikely to improve in the short term, and the bad weather is having a negative effect on demand.

A steel mill in north China has shut down a blast furnace recently without determining the specific time for resuming production. Impact on steel raw materials supply is subdued.

In a steel mill in central China,  inventories are modest, and traders are facing increasing pressure to sell cargoes.. The steel mill suffers a substantial decline in profit.

As for another steel mill in the northeast China, although the blast furnace has maintained a normal production state recently, the rolling lines has been overhauled. In July, there would be a decline in the volume of agreement with traders.

A steel plant in south China has maintained a full production status without any maintenance plan at present. The mill is facing some inventory pressure and remains cautious and optimistic about the spot market in the near term.