[SMM Electric Furnace Operating Rate] Winter is Coming: When Will Electric Furnace Steel Mills Shut Down?

According to an SMM survey, as of November 26, the operating rate of 50 major electric furnace steel mills producing construction steel nationwide was 38.80%, down 0.48% WoW; the capacity utilisation rate was 40.20%, down 0.45% WoW; and the daily average production of construction steel was 89,500 mt, down 1,000 mt WoW.

During the survey period (November 20-26), the ferrous metal market rebounded after hitting the bottom and continued a fluctuating trend. From a macro perspective, although policies to support real estate and debt restructuring were proposed, their market stimulation effect was limited. In terms of spot cargo, the demand for construction steel in the north declined due to low temperatures, while the demand in the south remained weak and stable. The fundamental supply-demand pattern of weak supply and demand continued, with most steel mills maintaining a largely stable operating rate. The operating rate of electric furnaces slightly decreased to 38.80% this period.

By region, in east China, construction conditions were relatively better compared to other regions nationwide, and overall inventory could still be reduced. However, steel mill profits were generally poor, and most steel mills had reduced their operating hours to below 12 hours, except for a few mills that operated longer to meet production targets. In south China, a few steel mills experienced slight losses, but with limited fluctuations in steel prices recently, most steel mills were near the break-even point, leading to indecisive production and a wait-and-see approach. In central China, inventory gradually accumulated, but the supply-demand imbalance was not significant as some blast furnace steel mills also reduced production, allowing electric furnace steel mills to maintain a moderate operating rate. In southwest China, most steel mills were on the verge of breaking even, with little change in the overall supply-demand pattern this period. Most steel mills maintained the operating rate of the previous period, and future production adjustments will depend on market changes.

Looking ahead, the macro perspective is temporarily in a vacuum period, and the raw material side also lacks effective support. The conditions for a rise in steel prices are insufficient. However, considering the low inventory of finished products and adjustments in construction material production by some blast furnace steel mills, a significant drop in steel prices is unlikely. Under the weak supply and demand pattern, steel prices are expected to continue fluctuating, which may become the main trend in the near term. The operating rate of electric furnaces is likely to remain largely stable in the next period.