Will there be a loss when production resumes? [SMM electric furnace operating rate]

According to SMM research, as of March 5, the operating rate of 50 electric furnace steel mills that mainly produce building materials was 44.28%, an increase of 10.52 percentage points from the previous month; the capacity utilization rate was 43.34%, an increase of 6.49 percentage points from the previous month; the average daily output of building materials was 96,300 tons, an increase of 14,500 tons from the previous month.

During the survey period (February 27-March 5), rebar prices fluctuated downwards, spot price dropped significantly, and the downstream resumption progress was slow amid muted transactions. This week, many electric furnace steel mills resumed production as planned, but there are still some electric furnace plants that delayed resumption due to losses, resulting in a slowdown in the overall operating rate. This week, the electric furnace operating rate was 44.28%.

In terms of regions, in east China, some steel mills resumed production slightly late last week due to rolling mill maintenance and upgrades, but have gradually resumed production this week. Steel prices in the region continued to decline, and most steel mills were at a loss, with losses reaching 100 yuan/ton. In south China, except for a few steel mills that cannot resume production due to line reconstruction, most steel plants have entered normal production. It is reported that regional electricity prices have been reduced, but it has not had a substantial impact on profits so far. There are steel mills in central China that postponed resumption due to environmental inspections and production line installation in the early stage. They have resumed production this week. However, recent market shipments were poor amid sluggish demand. Some steel mills still take a wait-and-see attitude. In southwest China, steel prices continue to fall amid sluggish demand. Previously, most steel mills in the region achieved break-even, and are now suffering losses. Although new capacity was resumed, the mentality of steel mills is generally more cautious.

Most electric furnace steel mills resumed production, but steel prices after the holiday are weak, the recovery of demand is not as good as expected, and the follow-up expectations are not optimistic. In the short term, valley power production may still be the mainstream. The operating rate of electric furnaces is expected to increase only slightly next week.