SMM Electric Arc Furnace Operating Rate: Electric arc furnace steel mills cut production

According to the SMM survey, as of July 30, the operating rate of 50 major electric arc furnace steel mills producing rebar nationwide was 23.28%, down 2.9 percentage points WoW; the capacity utilization rate was 24.01%, down 3.54 percentage points; the average daily output of rebar was 53,500 mt, down 7,900 mt.

During the survey period (July 24-30), the market prices plummeted rapidly. In terms of spot goods, under the background of weak demand in the off-season, the switch between new and old standards triggered market inventory concerns. Merchants dumped goods at low prices, leading to a rapid decline in spot prices. The losses of steel mills intensified, and the operating rate of electric arc furnaces decreased by 2.9 percentage points this week, reaching 23.28%.

By region, in east China, the large volume of futures and spot transactions and the decline in futures prices significantly impacted the spot market, leading to a substantial drop in spot prices. The supply of steel scrap has not eased, putting pressure on electric arc furnace steel mills' production. Enthusiasm for production is decreasing, and many steel mills plan to reduce production or even shut down in the next period. In south China, steel mills are still operating at a loss, but the overall inventory pressure in the region is not significant. Some steel mills started producing new national standard products, causing a slight rebound in operating rate. In central China, losses intensified, with new temporary shutdowns of steel mills this period. Resumption of production will depend on market conditions. In southwest China, the off-season led to a shortage of steel scrap supply, making it difficult for steel mills to collect scrap. Recently, spot prices plummeted, expanding the losses of steel mills and reducing enthusiasm for production, resulting in a slight decline in operating levels.

Looking ahead, it is difficult to be optimistic about macro policies. PMI data is about to be released, but the market does not have high expectations. Industry-wise, the significant drop in finished product prices damaged steel mill profits. Recently, both blast furnaces and electric arc furnace-based steel mills cut production, which may reduce supply-side pressure. However, demand side, the off-season impact is inevitable, making it difficult to reverse the weak supply and demand pattern. For electric arc furnaces, cost side, steel scrap supply is unlikely to ease. Sales side, the lack of momentum in steel price increases may lead to continued losses for steel mills, and the operating rate is expected to continue to decline in the next period.