【Electric Arc Furnace Steel】Policy Boosts Expectations, Stabilizing Steel Volume and Price

This week, the domestic construction steel market experienced a slight increase. Despite average downstream demand, macroeconomic expectations remain positive, prompting some merchants to hold firm on prices. As of December 12, the average price of rebar in China reached RMB 3,439 per ton, up RMB 48 from last Friday.

Raw Materials: Scrap steel prices rose modestly this week as many steel mills increased procurement prices to replenish inventories. The average purchase price for electric arc furnace (EAF) materials increased by RMB 9 to RMB 2,286 per ton (excluding tax). Both scrap steel arrivals and inventories at steel mills saw simultaneous growth.

Losses at EAF mills narrowed for the second consecutive week. Some previously idle furnaces resumed production, slowing the decline in output. Steel mills and steel foundries typically use UHP electrodes (usually 350 mm and above) for Electric Arc Furnaces (EAF), while HP and UHP electrodes (usually 400 mm and below) are used in other applications. As of December 12, the capacity utilization rate of 135 EAF mills nationwide was 51.46%, down 0.48% from the previous week. Daily EAF steel output stood at 322,000 tons, marking seven consecutive weeks of decline.

Policy Signals: At the December 9 Politburo meeting, policymakers emphasized the need for a "more active fiscal policy" and stabilizing the stock and real estate markets. For the first time in 14 years, they proposed a "moderately loose" monetary policy and unprecedented "extraordinary counter-cyclical adjustments."

At the Central Economic Work Conference on December 11-12, priorities for 2025 were outlined, including boosting consumption, improving investment efficiency, and expanding domestic demand comprehensively. Measures will include special actions to stimulate consumption, expanding the scope of new policies, supporting key projects, enhancing fiscal and financial coordination, promoting urban renewal, and reducing nationwide logistics costs.

Outlook: The enhanced policy measures to expand domestic demand in 2025 are expected to bolster market confidence. Winter steel stockpiling may outperform expectations, benefiting EAF steel mills' production and operations.

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