Difficulties in Steel Scrap Collection and Order Cancellation: EAF Steel Mills Adjust Operating Rhythms Amid Losses

During the survey period (June 17-24), the spot price of rebar fluctuated, with the average price falling 20 yuan/mt WoW. Amidst hot and rainy weather, steel demand remained weak, and the spot price of finished steel continued to decline. The profitability of EAF steel mills showed little improvement. Currently, the operating status of EAF steel mills varies across regions. In South China, some EAF steel mills reduced production earlier, leading to insufficient order fulfillment. This week, they extended their operating hours to ensure delivery. In East, Central, and South-West China, EAF steel mills faced poor profits. This week, one EAF steel mill halted production for maintenance, while three others shortened their operating hours. Overall, the national EAF operating rate this week was 31.38%, up 0.4% WoW.

Regionally, in East China, the current EAF operating rate was 32.1%, down 2% MoM from the previous period. This week, one additional EAF steel mill halted production for maintenance, while others in the region maintained low operating levels. In South China, the current EAF operating rate was 37.7%, up 5.6% MoM from the previous period. Some EAF steel mills had shortened their operating hours earlier, resulting in insufficient order fulfillment capacity. Despite current operating losses, they were forced to extend their operating hours to ensure order completion. In Central China, the current EAF operating rate was 18.3%, down 1% MoM from the previous period. This week, one EAF steel mill in the region shortened its operating hours due to losses and difficulties in steel scrap collection, leading to a slight decrease in the overall regional operating rate. In South-West China, the current EAF operating rate was 32.7%, down 0.4% MoM from the previous period. Recently, with high steel scrap prices, some EAF enterprises have voluntarily reduced production.

Overall, the current profitability of EAF steel mills is poor. Most EAF steel mills have voluntarily conducted equipment maintenance or reduced production hours. With the continuation of hot and rainy weather in the later period, downstream construction activities will be constrained, and steel demand may further decline. There is a lack of strong support for the improvement of EAF steel mill profits. It is reported that some EAF steel mills still have plans to halt production for maintenance next week. Therefore, it is expected that the EAF operating rate may decline slightly next week.