Average operating rate of blast furnaces lower at 86.8%

SHANGHAI, Jan 28 (SMM)— The average operating rate of blast furnaces (BFs) at Chinese steel mills dipped 0.7 percentage point from the previous week to 86.8% as of January 28. This was 1.6 percentage points lower than the same period last year.

Some steel mills had to reduce production this week as transport of raw materials was affected by lockdown measures. Besides, steel makers in some regions suffered losses as feedstock prices increased. Mills in Shaanxi, Shanxi, Gansu and Sichuan were advised to conduct maintenance in Q1, a low season, which led to the decline in BF operating rates.

COVID-19 continues to rage overseas, and more than 100 million people around the world have now been infected with the virus. The production capacity of vaccines cannot meet the huge demand in the short term.

The Federal Reserve announced Wednesday to keep interest rates and bond purchase plans unchanged, and its chairman Jerome Powell said the economic recovery may slow down due to the pandemic. These stoked concerns on economic outlook and weighed on commodities prices.

In terms of fundamentals, output of steel products is expected to fall in the near term as operating rates of BFs and EAFs both declined this week, and demand continues to weaken. Daily trading volume of construction steel dropped to about 60,000 mt, and inventories also increased more than expected.

The Ministry of Industry and Information Technology announced to take steps to ensure a substantial decline in crude steel output in 2021, putting pressure on prices of raw materials such as coke and iron ore. Coke plants are likely to reduce prices after 15 rounds of price increase.

Steel prices are likely to continue to fluctuate range-bound amid weak demand and supply. Prices of finished steel products are expected to be stronger than feedstock prices in the near term.

BF operating rates at Chinese steel makers