【Graphite Electrodes】Concentrated Resumption of Electric Furnace Mills;...

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【Graphite Electrodes】Concentrated Resumption of Electric Furnace Mills; Domestic Scrap Steel Inventories Continue to Decline

Last week, the domestic scrap steel market gradually resumed activity. The rebar–scrap price spread and the plate–scrap price spread both narrowed. Steel mills are currently in poor profitability conditions, and scrap steel does not have a clear cost-performance advantage. On the steel mill side, both supply and demand increased last week. Demand from sampled steel mills gradually recovered, but arrivals were still lower than daily consumption, and most steel mills remained in the stage of inventory digestion. Entering this week, the operating rate and capacity utilization rate are expected to continue rising, further releasing scrap steel demand. However, it will still take time for upstream scrap generation resources to be fully released. It is expected that the growth rate of arrivals will remain slower than the growth rate of daily consumption, and the supply-demand gap will support firm scrap prices. Overall, considering the current lack of cost-performance advantage for scrap steel and the poor profitability of steel mills, domestic scrap prices are expected to remain mainly stable with occasional increases in the short term.

Steel Mills

As of March 5, the average operating rate of 87 independent electric arc furnace (EAF) steel mills was 24.71%, up 14.57% week-on-week and down 32.62% month-on-month. The capacity utilization rate was 20.71%, up 13.36% week-on-week and down 27.41% month-on-month. The average cost of independent EAF construction steel mills was RMB 3,358/ton, while the average profit was -RMB 93/ton, and the off-peak electricity profit was RMB 11/ton.

Last week, the capacity utilization rate and operating rate of independent EAF steel mills nationwide increased significantly. The main reason was that EAF mills resumed production intensively around the Lantern Festival, while downstream construction sites gradually resumed work, releasing part of the rigid demand. Entering this week, there is still room for further increases in both the capacity utilization rate and operating rate of independent EAF steel mills.

Market

As of March 5, a survey of 584 scrap steel processing enterprises with official access qualifications showed that the social inventory of scrap steel processing enterprises (excluding steel mill scrap companies) consisted of 216,300 tons of unprocessed raw materials and 646,400 tons of processed finished products, totaling 862,600 tons, an increase of 1.18% from the previous period. Processing yards have not yet fully resumed production, and the procurement of raw materials has been moderate. Scrap prices fluctuated little overall last week, and shipment sentiment from processing yards was also average. Entering this week, supply is expected to improve gradually as operations resume.

Regarding the scrap steel inventories of steel mills and related arrival conditions last week, according to survey statistics:

As of March 5, the total scrap steel inventory of 300 long- and short-process representative steel mills monitored by Mysteel was 4.9177 million tons, down 147,100 tons from last week, a decrease of 2.9%. The inventory turnover days were 8.3 days, up 0.2 days from last week. The total daily consumption was 416,900 tons, up 13.27% from last week, while the total daily arrivals were 399,600 tons, up 36.33% from last week. Last week, as some short-process steel mills resumed production, consumption increased, but market arrivals were poor, so steel mills mainly relied on inventory consumption. Entering this week, the operating rate of short-process steel mills will increase again, and steel mill consumption will further rise, continuing the trend of inventory reduction.

Summary

Last week, the domestic scrap steel market gradually resumed activity. The rebar–scrap and plate–scrap price spreads both narrowed. Steel mills are currently in poor profitability conditions, and scrap steel does not have a clear cost-performance advantage. On the steel mill side, both supply and demand increased last week. Demand from sampled steel mills gradually recovered, but arrivals were still lower than daily consumption, and most steel mills remained in the stage of inventory digestion. Entering this week, the operating rate and capacity utilization rate are expected to continue rising, further releasing scrap steel demand. However, it will still take time for upstream scrap generation resources to be fully released. It is expected that the growth rate of arrivals will remain slower than the growth rate of daily consumption, and the supply-demand gap will support firm scrap prices. Overall, considering the current lack of cost-performance advantage for scrap steel and the poor profitability of steel mills, domestic scrap prices are expected to remain mainly stable with occasional increases in the short term.

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