Chinese EAF Output likely to Plunge in September amid Operating Losses
As per the market sources, Chinese steel makers have scaled back their operations for the ongoing month of September due to scrap shortage, high costs and lower steel prices that have kept the manufacturers on the verge of losses.Chinese steel producers have increased scrap input in the BOF to meet stringent pollutant emissions standards.
The average scrap charge in BOFs in the first half was higher by 1.1% from a year earlier at 20.50% of the total burden, the China association of metal scrap utilisation (CAMU) said at SteelMint’s scrap conference in Bangkok, Thailand.
The rise in iron ore prices in the first half of 2019 due to Vale’s dam collapse have made the Chinese producers to switch to scrap usage. However, now although the situation has normalised and iron ore prices have registered a fall, scrap resources are tight in China with inventories of steel mills, scrap recyclers and processing enterprises lower than the same period of last year.
The average operating rate of EAF mills in China in first few days of September month have been recorded at 56%, lower by 4% against last month’s EAF operating rates and given the current situation where mills are also likely to undergo maintenance, Chinese EAF output is set to suffer in the ongoing month.
China's steel exports also suffer amid tepid global demand
According to China’s preliminary customs numbers, country’s steel exports in the month of August have registered a fall of 10% M-o-M basis from 5.57 MnT in Jul’19 to 5.01 MnT in Aug’19, hitting six months low mark.
Before this, Feb’19 remained the slowest month for Chinese steel exports this year, both in terms of the total volume at 4.51 MnT. China’s total exports in first eight months of 2019 (Jan-Aug) have been recorded at 44.97 MnT, falling by 4.4% against the corresponding period of previous year.
The key reason for the plunge in exports as cited by the market participants is the fall in steel exports to one of its key destinations, Vietnam due to increased trade barriers by the country and severe competition from low-priced Indian HRC.
Indian domestic steel market is currently facing slowdown due to which manufacturers are aggressively exploring overseas market especially ASEAN region, giving tough fight to the Chinese suppliers.
source: SteelMint
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