SMM Electric Furnace Operating Rate: Operating Rate Declined Further, How Long Will the "Winter" for Electric Furnace Mills Last?

During the survey period (October 21–October 28), from a macro perspective, both China and the U.S. signaled smooth progress in negotiations, and market expectations for further easing of relations were strong. Futures fluctuated upward, driving up the spot price of rebar, which rose 31 yuan/mt WoW on average. However, due to simultaneous increases in scrap steel prices across multiple regions, the profitability of electric furnace mills saw little change. Overall, the national electric furnace operating rate this week was 37.32%, down 1.02% WoW.

In east China, the electric furnace operating rate was 43.9%, up 1% WoW. Operating hours among regional electric furnace mills varied this week: one mill cut production due to losses, while another increased output slightly due to minimum production requirements under ultra-low emission monitoring. In south China, the operating rate was 45.2%, flat WoW. Favorable weather supported construction activity, leading to a slight increase in downstream demand. However, due to poor profitability, most mills maintained their previous production pace. In central China, the operating rate was 25%, unchanged WoW. Recent supply-demand patterns saw little change, shipments from electric furnace mills were average, and most mills maintained the same operating level as the previous period. In south-west China, the operating rate was 30.1%, down 4.8% WoW. Some mills in the region shortened operating hours due to losses, contributing to the decline in the regional operating rate.

Overall, current macro tailwinds have helped restore some market sentiment, but these positive factors are unlikely to sustainably drive steel inventory digestion. End-users continue to restock mainly on demand. In the short term, electric furnace mills still face dual challenges of losses and difficulty procuring scrap steel. Therefore, the national electric furnace operating rate is expected to remain low next week.