SMM Iron and Steel Co., Ltd.
According to SMM research, as of July 7, the operating rate of independent electric arc furnace steel mills reached 73.24%, down 4.49% from the same period last week and 11.52% lower than that of 84.76% in June.
Figure 1: the trend of operating rate of electric arc furnace steel plant from 2019 to now
Source: SMM
In the current scrap price is as strong as before, but the steel price performance is not satisfactory, the vast majority of electric arc furnace steel mills have no profit to speak of, and even more than half of them say that they are currently in a state of loss. In addition, the release of terminal demand is not smooth under seasonal interference, which leads to the gradual accumulation of plant and warehouse pressure, which constitutes two important factors to promote the decline of the operating rate of electric arc furnace steel plant.
Table 1: changes in scrap prices and thread spot prices in the mainstream market
Source: SMM
Figure 2: an overview of the profit trend of the production of threaded per ton steel in electric arc furnace steel mills from 2019 to now
Source: SMM
In the later stage, the operating rate of electric arc furnace is afraid to maintain the current low level, so it is difficult to have room to pick up. On the one hand, in the case of scrap resources are still tight, prices are likely to remain strong. On the other hand, affected by the weather, terminal demand shows regional differences-in the short term, heavy precipitation still hangs over the gathering areas of electric arc furnace production capacity in East China, Southwest China and Central China, and the release of demand in these areas is still suppressed to a certain extent. although the shipping situation of merchants is slightly better than the previous period, it is difficult to promote the effective digestion of relevant city inventory and electric furnace factory warehouse, and it is even more difficult to pull up steel prices.
[sub-regional]
East China: the operating rate fell to 78% from 84% in early June. Most steel mills say they are currently at a small loss, so the operating hours have been reduced.
On behalf of the steel mill A: at present, there is a small loss of dozens of yuan, and the operating hours have been reduced again. Since July, the operating rate has been reduced from 80% to about 60%.
Central China: the operating rate dropped from 67% to 35%. Poor demand performance is the main factor to promote the production reduction of local steel mills, among which the overhaul and production reduction of electric arc furnace steel mills in Henan area is relatively more common.
On behalf of the steel plant B: the inventory pressure in the factory is relatively large, the shipment is relatively poor, and the basic specifications are accumulated in the factory. Production and maintenance will be suspended from the weekend (July 5) and is expected to be overhauled for a week. However, if the market still does not improve after the start of construction, it may be forced to be overhauled.
South China: the operating rate dropped from 88% to 83%. But as the rainy season fades away and demand resumes, there are signs of a slight pick-up in operating rates.
On behalf of the steel mill C: basically on the edge of profit and loss. There was a reduction in production in the early stage, and the operating rate was reduced to about 80% in mid-June under shipping pressure. Demand has recovered recently and has rebounded to 100% again.
Southwest: the operating rate dropped from 100% to 91%. Most electric arc furnace steel mills say that they are currently in a break-even state, and the plant warehouse pressure is an important factor for the relevant steel mills to reduce production.
On behalf of the steel mill D: the overhaul was completed last week and full production returned to full capacity. However, the pressure of the factory and warehouse is relatively large, which is about 3 times the normal volume of the factory.
