China's new EAF capacity growth slower than expected
Source: Mysteel
Jun 29, 2018 14:13
China’s new electric-arc-furnace steelmaking capacities have been growing more slowly than expected in the first half of 2018 amid factors including the cost effectiveness and authorities’ efforts to rein in the enthusiasm, according to market sources.
In the first half of 2018, China commissioned around 7 million tonnes/year of EAF steelmaking capacities, which was less than the anticipated 10 million t/y early this year, Ren Zhuqian, head of Mysteel’s steel information department, shared Mysteel’ research result at an industrial event in Shanghai last Friday.
“There are several factors that have slowed down new EAFs from coming on stream, among which are cost effectiveness, slower equipment upgrading, and lack of official approval on new EAFs,” she elaborated.
Mysteel’s survey showed that the 6-8mm carbon steel scrap in Zhangjiagang, East China’s Jiangsu province was at Yuan 2,090/tonne excluding the 16% VAT, up Yuan 520/t ($79/t) or 33% on year, or growing faster than the Yuan 331/t year-on-year gain in the HRB400 20mm rebar price to Yuan 3,466/t excluding the 16% VAT, both as of June 28.
A Shanghai-based steel trader noted the slower-than-expected progress too, though he suspected cost review may not be the key.
“Profitability is always the decisive factor for a Chinese steel producer to add on new capacities, and profit margins have been more than good, so it should be some other factors that have deterred the whole progress,” he said.
He suspected the Chinese authorities’ extreme carefulness when reviewing and approving new EAF capacities and capital availability of the steel mills could be among the reasons, though high costs of production materials such as graphite electrode may have cooled down the steel mills’ investment enthusiasm in EAF facilities.
As for the latter half of this year, Ren estimated another 12 million t/y EAF steel capacity to come on stream, and most of the newly-added EAF facilities in China for 2018 will be for construction steel.
Steel scrap, therefore, will stay popular in China this year partly due to the Beijing’s stepping up efforts in pollution control, and the average scrap feeds into converters is estimated at 13%-20%, Mysteel understands from the market.
China's official data shows that the country' crude steel output in the first five months increased by 5.4% on year to 369.9 million tonnes, while the pig iron ore output declined 0.6% on year to 305.6 million tonnes, indicating an increase of scrap utilization in China's steelmaking.
Written by Victoria Zou, zyongjia@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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