Rally Pauses: Will Electric Furnace Operating Rate Recover Next Week?

During the survey period (August 5-12), influenced by the news of the "276 working days" policy for coking coal, futures fluctuated upward, and spot prices in the market followed suit with a slight increase. The average price rose 29 yuan/mt WoW. However, due to seasonal factors, heavy rainfall persisted in many regions, and downstream demand remained weak. End-users mostly maintained just-in-time procurement, and overall transaction volumes were average. Currently, the operating status of electric furnace mills has shown some differentiation. This week, one electric furnace mill resumed production, two extended their operating hours, one cut production, and one halted production for maintenance. Overall, the national electric furnace operating rate this week was 39.9%, down 0.78% WoW.
In east China, the electric furnace operating rate this period was 44.7%, up 0.3% MoM from the previous period. This week, the profitability of electric furnace mills in the region changed little, and a few electric furnace mills slightly extended their operating hours, leading to a slight increase in the overall regional operating rate. In south China, the electric furnace operating rate this period was 48%, down 1% MoM from the previous period. Affected by the heavy rainfall in the early period, construction sites faced obstacles, and the shipment rhythm of steel mills slowed down. In-plant inventory slightly accumulated, and a few electric furnace mills shortened their operating hours to alleviate inventory pressure. In central China, the electric furnace operating rate this period was 19.9%, down 9.3% MoM from the previous period. This week, the operating status of electric furnace mills in the region showed some differentiation. One electric furnace mill in Henan extended its operating hours due to the profitability of some product specifications, while one electric furnace mill in Hubei chose to halt production for maintenance due to deteriorating profitability. In south-west China, the electric furnace operating rate this period was 38.9%, up 3% MoM from the previous period. Currently, the supply-demand pattern in the region has changed little. A few electric furnace mills resumed production as planned, while others mostly maintained production during off-peak and peak electricity hours. Overall, with the continuous hot and rainy weather, the actual demand from terminals/end-users is suppressed by seasonal factors. Electric furnace plants are facing dual pressures of inventory buildup of finished products and increased costs of steel scrap recycling. Therefore, it is expected that the profits of electric furnace plants may continue to decline next week, and the operating rate of electric furnace plants nationwide may also decline slightly.