Improved Profitability Drives Four Consecutive Weeks of Increase in Electric Furnace Operating Rate

According to the SMM survey, as of July 29, the operating rate of electric furnace steel mills producing building materials among 50 major steel mills nationwide was 37.82%, up 2.08% MoM from the previous period; the capacity utilization rate was 38.6%, up 1.56% MoM; the daily average production of building materials was 85,900 mt, up 3,500 mt MoM. During the survey period (July 22-29), as the month-end Political Bureau meeting approached, the macro front's "anti-rat race" competition policies continued to boost market confidence. However, dragged down by poor demand during the off-season, spot prices fluctuated, with the average price rising 24.5 yuan/mt WoW. The profitability of electric furnace mills in some regions improved, with one electric furnace mill resuming production this week and three extending their operating hours. Overall, the national electric furnace operating rate this week was 37.82%, up 2.08% WoW.
In east China, the electric furnace operating rate this period was 41.9%, up 1.3% MoM from the previous period. Affected by the rise in finished steel prices, the profitability of regional electric furnace mills improved, with three electric furnace mills extending their operating hours this week. In south China, the electric furnace operating rate this period was 43.8%, unchanged from the previous period. Affected by typhoon weather, the weak demand for steel remained unchanged. Currently, there is no significant adjustment in the overall production rhythm of electric furnace mills, with some electric furnace mills indicating a slight improvement in steel scrap procurement. In central China, the electric furnace operating rate this period was 29.1%, up 10.4% WoW. Driven by the dual benefits of improved profitability and increased orders, individual electric furnace mills resumed production this week, leading to a significant increase in the regional operating rate. In southwest China, the electric furnace operating rate this period was 33.1%, unchanged from the previous period. The profits of electric furnace mills in some regions recovered slightly, but considering the impact of power rationing due to high temperature and steel scrap costs, manufacturers did not increase their operating hours and maintained previous operating hours.
Overall, with the continuation of hot and rainy weather, the actual demand from terminals remains suppressed by seasonal factors. However, considering the upcoming important domestic meeting at month-end, sentiment-based support remains, and short-term spot prices will maintain a phased high. Next week, there are still electric furnace mills with production resumption plans, so it is expected that the national electric furnace operating rate may increase slightly next week.