Electric Furnace Operating Rate Rises for Five Consecutive Weeks: Can the Rally Continue Next Week?

During the survey period (July 29 - August 5), the Political Bureau meeting was held, and the market's expectations for capacity reduction cooled slightly. Additionally, Trump declared that the August 1 tariff deadline would not be extended, and concerns over trade barriers persisted. Both domestic and overseas macro sentiments cooled, futures pulled back, and spot prices fluctuated downward. The average spot price fell 78.7 yuan/mt WoW. The immediate profits of electric furnace mills contracted slightly. This week, three electric furnace mills resumed production, one cut production, and one increased production. Overall, the national electric furnace operating rate this week was 40.68%, up 2.86% WoW.
In east China, the current electric furnace operating rate was 44.4%, up 2.5% MoM from the previous period. The benefits of electric furnace mills changed little. This week, one electric furnace mill resumed production as planned, and one extended its operating hours, leading to an overall increase in the regional operating rate. In south China, the current electric furnace operating rate was 49%, up 5.3% MoM from the previous period. Affected by typhoon weather, most steel mills in the region currently have poor shipment conditions, maintaining their previous production levels. However, due to the planned resumption of production by two electric furnace mills this week, the overall operating rate of electric furnace mills in the region increased. In central China, the current electric furnace operating rate was 29.1%, unchanged from the previous week. During the survey period, steel prices fell significantly, and the immediate profits of electric furnace mills contracted slightly. Enterprises' wait-and-see sentiment intensified, and most currently maintained production during off-peak and valley electricity periods. In south-west China, the current electric furnace operating rate was 35.9%, up 2.9% MoM from the previous period. Currently, the supply-demand pattern in the region has not changed significantly. Individual electric furnace mills resumed production as planned, and there are still electric furnace mills with production resumption plans in the future. Production may be adjusted flexibly based on market changes. Overall, the profitability of electric furnace plants improved in the early stage, prompting some steel mills to extend their operating hours. Recently, however, spot prices have pulled back, leading to a decline in the immediate profitability of steel mills and an increase in market wait-and-see sentiment. Nevertheless, some electric furnace plants still plan to resume production next week. Therefore, it is expected that the operating rate of electric furnace plants nationwide may continue to rise next week, although the extent of the increase may be limited due to the subsequent impact of typhoon weather on production and demand.