WEEKLY: China EAF mills buckle as losses bite

During March 22-28, the average operational rate of the 87 independent EAF mills under Mysteel's regular tracking dipped 0.42 percentage point on week to 70.28%, though their capacity utilization rates averaged 53.06%, higher by 1.18 percentage points on week.

A few mills in Northeast and Southwest China hosting relatively larger capacity resumed production after completing routine maintenance this week, contributing to the overall rise in production, Mysteel Global learned.

However, more mills in East, South, and Central China reduced or halted production, saying they could no longer stand the losses they're taking when selling their steel, Mysteel Global noted.

As of March 28, the average loss on sales of construction steel incurred by the 35 independent EAF mills under Mysteel's other survey was Yuan 153/tonne ($21.5/t), wider by Yuan 70/t from last week's level.

Domestic steel demand waned again this week after last week's temporary revival, so the prices of most ferrous commodities generally retreated, Mysteel data shows. But the drop of steel scrap prices was not nearly as large as that in finished steel prices.

By March 28, China's national price for steel scrap stood at Yuan 2,804.1/t, lower by just Yuan 10/t from March 22, while that of HRB400E 20mm diameter rebar had tumbled by a large Yuan 102/t to reach Yuan 3,633/t, both including the 13% VAT, according to Mysteel's assessment.

To shave their production costs, most EAF mills shortened their daytime working hours and mainly produced during off-peak periods for electricity consumption at night, Mysteel's survey showed.

For the week ahead, unless domestic steel demand shows a significant recovery, more mills expect to scale back their production due to the heavy losses, survey respondents suggested.

Written by Anthea Shi, shihui@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com