【Electric Furnace Steel】 Retreating to Advance, 

Coping with the Off-Season

This week, Chinese domestic construction steel market continued its slight decline. Southern China experienced mostly rainy weather, and combined with a weak futures market, market transaction sentiment remained sluggish. As of June 20, the average price of domestic rebar was 3,616 yuan, down 12 yuan from last weekend.

On the raw materials front, both supply and demand in the domestic scrap steel market were weak this week. The flood season and high temperatures led to a decrease in scrap steel supply, causing the average purchase price of scrap steel by electric furnace steel mills to slightly increase compared to last weekend. Some electric furnace steel mills in the south (such as in Sichuan) chose to proactively reduce production, limiting operating hours to around 13 hours to cope with the off-season demand for construction steel. Consequently, electric furnace steel production continued to decline. In electric arc furnace smelting, graphite electrodes are used as conductive materials, and the supply is adequate.

Statistics show that as of June 20, the capacity utilization rate of 135 electric furnace steel mills in China was 57.53%, down 0.47% from the previous week, with a daily production of 353,800 tons, marking three consecutive weeks of decline.

Recently, the issuance of new special bonds and special national bonds has accelerated, and infrastructure demand is expected to gradually pick up in the third quarter, providing some support for the steel market. Meanwhile, local governments are gradually implementing this year's crude steel production control plans. Currently, the profitability of small and medium-sized integrated steel mills inland is not satisfactory, even less than the same period last year, resulting in significant inventory pressure. This may affect their production enthusiasm in the future, which will be beneficial for electric furnace steel. After the high-temperature period, electric furnace steel production is likely to rebound quickly.

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