[SMM Electric Furnace Operating Rate] Will Losses Lead Electric Furnace Steel Mills to Halt Production?

According to an SMM survey, as of December 3, the operating rate of 50 major electric furnace steel mills producing construction steel nationwide was 37.72%, down 1.08% WoW; the capacity utilisation rate was 38.89%, down 1.31% WoW; and the daily average production of construction steel was 86,600 mt, down 2,900 mt WoW.

During the survey period (November 27 to December 3), the ferrous metals series continued to fluctuate upward, with the macro environment remaining in a vacuum state. However, the market still has certain expectations for the upcoming meeting. In terms of spot cargo, futures market fluctuations narrowed and futures prices saw a slight rise, overall transaction enthusiasm improved somewhat, but downstream demand remained in the off-season with limited room for improvement. Coupled with rising raw material prices, steel mills' production enthusiasm was poor, and the electric furnace operating rate declined again to 37.72%.

By region, in east China, with the increase in steel scrap prices, some steel mills in east China experienced losses, with a loss of about 50 yuan per mt. The profit margins of other steel mills also narrowed, and the electric furnace operating rate in east China declined. In south China, although there are still construction conditions, the impact of the off-season cannot be ignored, and most steel mills controlled their operating hours to around 11 hours. In central China, some steel mills underwent equipment maintenance, reducing operating hours. The off-season market saw poor purchase willingness, and steel mills had fewer shipments, with most electric furnace steel mills in the region maintaining low operating levels. In southwest China, recent inventory slightly increased, finished product prices had limited gains, but rising steel scrap prices hurt steel mill profits, with some mills moving from break-even to slight losses. Looking ahead, with the weather continuing to cool, regions with construction conditions are decreasing, making it difficult to see an increase in demand. However, on the expectation side, the market remains optimistic about the central economic meeting. Therefore, even if steel mills face slight losses, the operating level is unlikely to see a significant reduction in the short term, and the electric furnace operating rate is expected to only decline slightly in the short term.