Nearly 60% of EF steel mills plan to shut down their furnaces in late January

According to SMM research, as of January 23, the operating rate of the 50 electric furnace (EF) steel mills that mainly produce building materials was 53.60%, down by 1.98 percentage points WoW; the capacity utilization rate was 52.25%, down by 1.47 percentage points WoW; the average daily output of building materials was 116,400 mt, down by 3,300 mt WoW.

During the survey period (January 16th to January 23rd), the rebar futures prices moved rangebound and the disruptions from seasonal factors intensified, the demand gradually reduced amid sluggish market, weighing on the efficiency of EF steel mills. The shutdown plan for CNY holidays was gradually implemented. The operating rate of electric furnaces this week was 53.60%, down by 1.98 percentage points WoW.

In terms of regions, in East China, efficiency continues to deteriorate, and individual steel mills have reached near the break-even line. Affected by profits, there were more steel mills in the region planning to shut down furnaces in the second half of January. The operating rate was stable this week. Electric furnace plants are expected to cease production one after another tomorrow; in South China, steel scarp have been sufficient recently, and profits narrowed slightly due to the price of finished products. However, the overall profitability level is still considerable compared to other regions. Most steel mills have stable production and low inventories. Affected by individual furnace shutdowns, the operating rate declined WoW. In central China, prices were stable and profits changed little. The loads of individual steel mills slightly adjusted, and the weekly operating rate dropped slightly by 1 percentage point to 37%; in southwest China, recent regional electric furnace plant profits and shipments were stable, with most production loads maintained. Impacted by the shutdown of individual steel mills, the operating rate fell to 44%.

Looking forward, according to SMM real-time survey results, nearly 60% of electric furnace steel mills plan to shut down furnaces in the late January. It is expected that the electric furnace operating rate will significantly decline next week.