A continuous fall in spot steel prices coupled with the high price of raw materials have prompted Chinese steelmakers to overhaul their rolling mills.
The Shanghai Metals Market (SMM) claims that 13 steel mills have already examined their blast furnaces – accounting for 1.32Mmt (metric tonnes) of steel output and it is thought that planned rolling mill overhauls will affect 2.547Mt of steel output.
Rebar steel mills in China have experienced losses of 150 yuan/tonne on average while hot rolling steel mills have lost 80 yuan/tonne on average.
High ore prices are the main reason behind the overhauls along with sluggish steel prices and the availability of high stocks of finished steel.
Blast furnace overhauls are limited as steel mills tend to overhaul their rolling mills first in order to reduce stocks. If ore prices continue on an upward curve, more ballast furnaces will be examined according to SMM.
That said, in what is known as the off season (July and August) the majority of steel mills use the time to overhaul their facilities. Facility overhauls will likely lead to a short-term rebound in steel prices in the future when some steel varieties are in short supply, claims SMM.
Source: China Metals.