Operating rates across EAF steelmakers drop 15 percentage points on month

SHANGHAI, Aug 7 (SMM) – Chinese electric arc furnace (EAF) steelmakers who use steel scrap, rather than iron ore, as feedstock have sharply scaled back operations as firm costs and falling steel prices pushed them into deeper losses.

An SMM survey showed that the average operating rate across major EAF steelmakers is expected to fall for a third straight month, declining 15 percentage points from July to stand at 57% in August.

Such steelmakers could see a loss of 273.15 yuan/mt as of Tuesday August 6, while costs came in at 3,933.15 yuan/mt, based on Changzhou steel scrap with a tax-included price of 2,390 yuan/mt, showed SMM calculations.

A potential supply recovery and escalating trade dispute between the US and China weighed on steel prices. The nationwide average price for rebar dropped 238.7 yuan/mt from the start of July to stand at 3,894 yuan/mt as of August 6, the lowest since April, showed SMM assessments.

Tangshan, the top steelmaking hub, loosened its production curbs in August, which dimmed the hopes for further declines in steel supply.

The SMM survey also showed that operating rates across re-rollers, who purchase billets as raw materials to produce steel products, dipped 2 percentage points month on month to 68%.

Re-rollers maintained stable operation as they continued to see moderate losses. The rate was lowered by production cuts or suspension at mills in some regions as losses widened.