More Chinese mills have joined those recently redirecting their molten steel to flat rolled items rather than longs, as the profits they can earn on the former are now higher, Mysteel Global learnt from market sources on December 10.
“We have diverted our focus to flat steel production from long steel recently, as the margins for cold-rolled steel are extremely good,” an official with a steel mill based in Central China’s Hunan province explained.
A steel producer in East China’s Shandong said that his company had already switched from longs to flat steel production a month and half ago.
“After considering the business efficiency, it is very natural for steel mills to divert all the steel from their converters to flat steel production or only keep very limited production of long steel,” he said. For his company, the gross profits for flat steel are as high as Yuan 800-900/tonne ($122.3-137.6/t) while those on long steel are currently only at Yuan 100-200/t, and on section steel of certain specifications, the mill is even making losses, he explained.
Mysteel’s latest survey across 184 steel mills nationwide showed that over December 3-9, rebar output decreased for the second straight week, slipping by another 44,100 tonnes or 1.2% on week to 3.55 million tonnes, while that of HRC reversed up by 10,500 tonnes or 0.3% on week to 3.29 million tonnes. One survey respondent confirmed that the reduction in rebar output and the increase in HRC output has to do with the conversion of mills’ production between the two kinds of products.
Yet, the change of volumes resulting from the switchover “may not be as big as many have expected,” market sources acknowledged, as the capacity that can be readily converted is very limited in China.
“Not that many steelmakers in China are covering the full scope of products,” the Shandong mill official said. He cited Shagang Group, the country’s largest private steel mill located in East China’s Jiangsu province as a prime example. “Many are specialized producing either long steel or flat steel,” he noted.
A Shanghai-based market watcher claimed that nationwide, fewer than twenty mills – and mainly large-sized ones at that– have such a capability.
Moreover, the profits available from producing longs, though smaller than for flats, remain positive, which may also limit the volumes redirected, according to the analyst.
For last month before the iron ore price spikes, Mysteel’s survey showed that the profits of blast furnace-based mills producing rebar averaged Yuan 300/tonne while those of the electric-arc-furnace mills were around Yuan 200/t, as Mysteel Global reported. An official from a mill based in Shaanxi in Northwest China verified that his mill is earning gross profits of Yuan 200/t for rebar.
Source : https://www.mysteel.net/article