【EAF Steel】Macro Outlook vs. Winter Stocking Trades

This week, domestic steel prices have mostly fluctuated within a narrow range. Led by the futures market, prices slightly strengthened in the latter half of the week. Overall, market inventory levels remain low, and merchants face little pressure in terms of inventory reduction. As of November 21, the average price of rebar in China was 3,383 yuan, down 44 yuan from last Friday. More about the Graphite electrode market trend.

In terms of raw materials, scrap steel prices initially weakened before rising again. The average purchase price for electric arc furnace (EAF) scrap steel was 2,269 yuan/ton (excluding tax), down by 18 yuan from last week, with the decline less than that of rebar. EAF steel mills have been reporting losses for the past two weeks, and the scope of production cuts is gradually increasing. According to statistics, as of November 21, the operating rate of 135 EAF steel mills in China was 55.29%, a decrease of 1.28% from the previous week, with daily EAF steel output at 346,000 tons, a continuous decline for four weeks.

Recently, several steel mills have announced winter stocking policies. However, since macroeconomic positive factors will take time to materialize, and the construction steel market has entered the traditional off-season, downstream users and merchants are not particularly eager to replenish stocks, except for some year-end urgent projects. The steel market is expected to remain weak and fluctuate in the short term.

In comparison, the inventory levels of raw materials like scrap steel, iron ore, and coke are not high. Steel mills have a basic need to replenish stocks before the year-end, so short-term prices may trend upwards, further squeezing the profits and production of EAF steel mills.

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