Steel: Recovering demand to keep rebar prices at highs
SHANGHAI (Scrap Register): SMM believes that prices of rebar will consolidate at highs this week as seasonal factors drive demand. Last week, frequent environmental curbs grew concerns over tighter supply and bolstered rebar prices. Improved weather also accelerated the recovery of construction demand.
Average prices of rebar increased 15.3 yuan/mt week on week to stand at 3,902.4 yuan/mt in the week to Friday March 8. Operating rates of electrical arc furnaces (EAFs) rebounded to pre-CNY levels of 60% in March, an SMM survey found. This compared to 17% in February, affected by CNY closures.
While most plants that operate with EAFs had returned online as of March 8, majority of them suffered losses. SMM learned that this kept them resuming at slower paces after CNY. As a result, growth in their supplies had minimal impact on steel prices. In the weeks ahead, limited upward room is expected in their production given current losses.
As of Friday March 8, production costs for EAFs stood at 3,861 yuan/mt. SMM surveyed 30 domestic steel mills and assessed costs based on steel scrap prices of 2,400 yuan/mt. This led to a loss of 61 yuan/mt, down from a loss of 192 yuan/mt a month earlier.
Stable resumption of downstream demand started to lower rebar inventories in the week ended Thursday March 7, the fourth week after CNY, SMM data showed.
Overall inventories, including social and in-plant stocks, shrank to 13.25 million mt as of Thursday March 7, down 2.8% from a week ago and down 4.3% from a lunar year earlier. This compared with a week-on-week growth of 3.8% on Thursday February 28.