SMM Electric Furnace Operating Rate

During the survey period (October 14–October 21), demand recovery strength and sustainability during the September-October peak season remained insufficient due to the drag from the real estate sector. This week, spot steel prices fell 8 yuan/mt WoW, downstream end-users showed low acceptance of high-priced resources, and most maintained a purchase-as-needed strategy. Market trading sentiment was relatively cautious, and overall transaction activity was moderate. Electric furnace mills, constrained by sluggish market conditions and high cost pressure, mostly maintained production during off-peak electricity hours. Overall, the national electric furnace operating rate this week was 38.34%, down 0.06% WoW.

East China: The operating rate for electric furnaces this period was 42.9%, down 0.8% WoW. Currently, electric furnace mills face poor profitability, coupled with a slight accumulation of in-factory inventory at steel mills. To alleviate inventory pressure, some electric furnace mills have accordingly shortened operating hours.
South China: The operating rate this period was 45.2%, up 0.1% WoW. This week, two electric furnace mills in the region adjusted their production strategies in opposite directions based on differing cost and profitability considerations. One mill extended operating hours appropriately to maximize benefits in line with its fixed costs, while the other shortened operating hours to control cost pressure amid worsening losses.
Central China: The operating rate this period was 25%, flat WoW. The current supply-demand pattern for construction materials in the region has not changed significantly, and most steel mills continue operating at last period’s levels. Future production will remain flexibly adjustable depending on actual changes in market supply-demand and prices.
South-west China: The operating rate this period was 34.9%, up 0.6% WoW. Due to an extension of electricity subsidy periods in Sichuan, some electric furnace mills have extended operating hours, leading to a slight rise in the regional operating rate.

Overall, structural imbalances in the supply-demand dynamics of the construction materials market have not yet been effectively resolved. Electric furnace mills still face dual challenges of loss pressure and difficulty in procuring steel scrap in the short term. However, as important domestic meetings approach, market expectations are gradually strengthening for favorable policies such as infrastructure investment boosts and real estate policy optimizations. If subsequent macro tailwinds drive up steel prices and thereby improve electric furnace mill profitability, some mills may choose to increase operating hours. Combined with the fact that a few mills already have clear production resumption plans, the national electric furnace operating rate is expected to rise next week.