【Electric Arc Furnace Steel】Increased Scrap Tax Burden and Declining EAF Profits

This week, the domestic construction steel market exhibited narrow fluctuations. The inventory accumulation during the Labor Day holiday and the subsequent increase in steel production have led to increased market resource pressure, causing merchants to adopt a cautious and wait-and-see approach. As of May 9, the average price of rebar in China was 3,750 RMB, up 39 RMB from the end of April.

On the raw materials front, the dual impact of post-holiday restocking by steel mills and increased taxes has pushed up domestic scrap prices. The average purchase price of scrap for EAFs rose by 43 RMB compared to last weekend, reaching 2,492 RMB (excluding tax). You can also inquire about graphite electrode production and sales. As a result, EAF profits have further declined, and production has ended its five-week consecutive increase. As of May 9, the capacity utilization rate of 135 EAF steel mills nationwide was 56.84%, down 0.58% week-on-week, with daily EAF steel production reaching 349,700 tons.

Recently, there have been signs of a rebound in domestic steel market demand, with various policies promoting the replacement of old goods and stimulating consumption emerging across the country. These policies have had a positive impact on the household appliances, automotive, and machinery industries. Additionally, the real estate sector is expected to receive more financial support, and funding for infrastructure projects is gradually being realized.

Overall, the domestic steel market in May is expected to exhibit a trend of strong fluctuations. However, despite the significant increase in production from both long and short-process steel mills, the market will continue to face inventory reduction pressures. Under these circumstances, even if EAF production continues to rise, profits are unlikely to see significant improvement. For more EAF steel market Analysis & Forecast, feel free to contact us anytime.