Steel demand started to recover steadily as EAF steelmakers resumed production after the Chinese New Year holiday (January 31-February 6).
The resumption of EAF mills also had an impact on steel scrap consumption levels. For example, on February 11-17, daily scrap consumption averaged 2,720 tons/day, up 8.2% week on week.
He noted that despite the recovery in capacity utilization by EAF producers, the resumption rate of these steelmakers was slower than market observers had expected.
"The recent decline in both domestic steel prices and raw material prices such as iron ore is shrinking profit margins for most EAF producers," said a Shanghai-based source.
As of February 21, the price of 20mm diameter rebar in China fell by Yuan 81/ton ($12.8/t) week on week to Yuan 4,929/t. However, on the same day, scrap prices remained largely stable.
In addition to shrinking margins from EAF mills, the limited availability of steel scrap is also said to be preventing the mini-factories from resuming their operations quickly.
A Shanghai market source said, "Some scrap collectors have not yet started work after the Lantern Festival on February 15. In addition, rigorous testing of truck drivers to prevent the spread of COVID-19 and the closure of some highway exits and entrances for the same reason, in eastern parts of China. It's disrupting scrap deliveries to factories." Said.
On February 11-17, deliveries of scrap to steel mills were at a low level. Steelmakers stated that they had to deplete their own stocks to continue their production.
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