Collision Between "Maintaining Market Share" and "Power Rationing Wave": Divergence in Operating Rates of Regional Electric Furnace Steel Mills

During the survey period (June 24 - July 1), the spot price of rebar fluctuated, with the average price falling by 9 yuan/mt WoW. Currently, the high-temperature weather persists, limiting the actual consumption of building materials. The enthusiasm for downstream procurement remains low, and the profitability of electric furnace mills is unlikely to improve. Currently, the operating rates of electric furnace mills vary by region. In some parts of southwest China, power rationing due to high temperature has led to increased production costs for steel mills, prompting some electric furnace mills in the region to halt or reduce production this week. However, in east China, two electric furnace producers resumed production based on strategic considerations of maintaining market share and fulfilling their responsibility to ensure employees' livelihoods, thereby driving an increase in the national electric furnace operating rate. This week, the national electric furnace operating rate stood at 31.86%, up 0.48% WoW.

By region, in east China, the electric furnace operating rate was 39.5% this period, up 7.4% from the previous period. This week, two electric furnace mills in the region resumed production based on comprehensive considerations of stabilizing market share and safeguarding employees' rights and interests, driving a significant increase in the overall regional operating rate. In south China, the electric furnace operating rate was 37.7% this period, unchanged from the previous period. Currently, the supply-demand pattern in the region has not changed significantly, and most steel mills still maintain the operating levels of the previous period. Subsequent production may be adjusted flexibly based on market changes. In central China, the electric furnace operating rate was 18.3% this period, unchanged from the previous period. Currently, the profitability of electric furnace mills in the region is poor, and most electric furnace mills maintain a low operating level. In southwest China, the electric furnace operating rate was 25.9% this period, down 6.8% from the previous period. Currently, power rationing due to high temperature is occurring in some areas, leading to increased electricity costs for electric furnace mills and exacerbating overall losses. This week, two additional electric furnace mills halted production for maintenance, and two electric furnace mills voluntarily reduced production.

Looking ahead, structural adjustments to electricity prices in some regions this month will lead to dynamic fluctuations in the production costs of electric furnace steel enterprises. In view of this, the operating pace of electric furnace mills may be adjusted accordingly. However, considering that the current profitability of the electric furnace steelmaking industry is in a relatively low range, it is expected that the national electric furnace operating rate will remain low next week.