China's heatwave forces some EAF mills to slow operations
Though summer is far from over in China, this year's has already produced the country's strongest heatwave in over 60 years, the China Meteorological Administration has said, with several regions experiencing consistent high temperatures above 40 degrees Celsius. Moreover, as of August 16 the met administration had issued high-temperature alerts for 27 consecutive days, Mysteel Global notes.
Inevitably, the high temperatures are pushing electricity usage to the limit as households and offices lean on air-con units and fans, forcing local governments in many regions including East China's Zhejiang, Jiangsu and Anhui provinces to ask large power consumers among industrial enterprises to throttle back their usage.
Included in the request have been EAF steelmakers, which consume double the electricity to produce a tonne of steel compared with blast furnaces, Mysteel Global noted.
For example, since early last week local EAF steelmakers in Zhejiang and Jiangsu have been asked to adjust work schedules or produce on alternating days to conserve power.
"We have shortened our production schedule from the previous 14-15 hours per day to only 7-9 hours per day currently, and tried to avoid producing during peak time for power consumption – in the morning and early evening – to minimize our electricity consumption," an official with an EAF mill in Zhejiang told Mysteel Global, adding that he was unsure when his mill's production might return to normal.
Besides the eastern areas of China, starting this week, power shortages have also been experienced in provinces in Southwest China, Mysteel Global noted.
Steel producers in Sichuan, for example, including both blast furnace and EAF mills, were ordered to scale down or halt production beginning August 15, as part of efforts to reduce the province's energy consumption and energy-use intensity, according to Mysteel's latest survey.
This round of production suspensions is expected to last for seven days and could cost Sichuan some 210,000 tonnes in lost steel output, Mysteel Global noted.
However, the impact of power rationing measures on EAF operations in these areas is likely to be limited, market watchers predicted.
"Even though some EAF plants are being impacted by the power shortages, the disruptions will be temporary, as the heat wave has gradually started to ebb," a scrap trader in Shanghai observed. "We're also seeing demand for power from ordinary consumers easing slightly," she added.
In addition, scrap-price trends are being more influenced by the limited scrap availability currently, so the temporary suspension of melting at some mills will not affect the prevailing supply-demand imbalance, according to her.
Another official from a Jiangsu-based EAF mill shared the same opinion. "Our plant received a blackout notification several days ago (so) for now, we only produce eight hours per day," he said.
But in fact, even before the notification was issued, his plant had planned to rein in output anyway as the mill's rather low scrap deliveries currently – averaging only 900 tonnes/day – could not allow the mill to maintain normal production where its scrap requirements could reach 2,000 t/d.
"We're still having to pay more to our scrap suppliers these days to attract more deliveries," he admitted.
As of August 15, Mysteel's steel scrap price index had edged up by Yuan 210.9/tonne ($31.1/t) on week or Yuan 326.6/t on month to Yuan 3,224.3/t and including the 13% VAT, according to the database.
Written by Lindsey Liu, liulingxian@mysteel.com
Edited by Zhenqi Yang, yangzhenqi@mysteel.com
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