[SMM Electric Arc Furnace Operating Rate] Operating rate dropped again, are electric arc furnaces on the verge of complete shutdown?

According to the SMM survey, as of August 6, the operating rate of 50 major rebar electric furnace steel mills nationwide was 20.48%, down 2.80 percentage points WoW; the capacity utilization rate was 21.46%, down 2.55 percentage points WoW; the average daily output of rebar was 47,800 mt, down 5,700 mt.

During the survey period (July 31 - August 6), the market prices first rose and then fell. In terms of spot goods, under the background of weak demand in the off-season, new standard products were gradually launched, and traders and steel mills prioritized clearing old standard inventories. Spot prices were more likely to fall than rise, steel mills continued to suffer losses, and the operating rate of electric arc furnaces decreased by 2.8 percentage points to 23.28% this week.

By region, in east China, the large volume of futures and spot transactions and the significant impact of futures market prices declines on the spot market have led to a substantial drop in spot prices. The supply of steel scrap has not eased, putting pressure on electric arc furnace-based steel mills, reducing their enthusiasm for production. Many mills plan to cut production or even shut down in the next period. In south China, steel mills are still operating at a loss, but regional inventory continues to deplete, resulting in lower overall inventory pressure. This period saw some mills resuming production of new standard rebar after long-term shutdowns, causing a slight rebound in the operating rate. In central China, steel mills remain unprofitable, but considering worker placement issues, new mills have started low-volume production this period, leading to a slight increase in the operating rate. In southwest China, losses have not further expanded, but profitability remains elusive. Most southwest electric arc furnace-based steel mills are maintaining low operating levels to ensure normal operations.

Looking ahead, macroeconomic policies are unlikely to be favorable. In the industry, pig iron production is gradually decreasing, raw material prices are weak, and cost support is at risk of weakening. The continued weak supply and demand pattern suggests that steel prices may fluctuate weakly in the future, making it difficult for steel mills to turn a profit and reducing their motivation for production. However, the operating rate of electric arc furnace-based steel mills has already dropped to a post-holiday low, leaving little room for further decline. It is expected that the operating rate may stabilize in the next period.