LONDON, November 28, 2017 /PRNewswire/ --

This Insight is the fourth in a series of five that look at China's capacity reduction programme and its key implications. In this Insight, we examine the impact of improved Chinese capacity utilisation on EAF production elsewhere in the world, particularly South East Asia, and on scrap market dynamics and prices. We find that, given a stronger steel price environment and lower availability of both finished and semi-finished steel in China, EAF-based production elsewhere is higher. Furthermore, higher billet prices and stronger scrap demand are supportive of higher scrap prices. Margins for EAF-based producers will decline from current levels, but not to the lows of a few years back.

     (Logo: http://mma.prnewswire.com/media/536199/CRU_Logo.jpg )

Better times to remain for EAF producers in Asia
CRU forecasts ongoing increases in Chinese crude steel capacity utilisation as spare capacity is cut further. Our domestic steel price forecasts have been upgraded, and with them, expectations of industry profitability. Likewise, our outlook for Chinese steel export volumes, both finished and semi-finished, have been reduced.

Lower availability and higher prices of billet are expected to lift EAF-based steel output elsewhere as steel producers that had, in recent years, reduced primary steel output in favour of importing lower cost billet, will be more able to produce. Scrap and billet prices represent an arbitrage opportunity for EAF-based steelmakers, something that has played out strongly since 2014. Higher finished steel and billet prices will lift scrap demand and prices as EAF-based output increase. Because scrap prices are expected to rise in line with steel prices, and domestic premiums are unlikely to rise, margins for EAF-based production are not expected to lift substantially because of higher scrap use. That said, the spread between finished steel and billet prices is expected to remain in place, which will support margins, but at a slightly lower level than in this past year. Note: for simplicity was have excluded any potential impact from a shortage graphite electrodes and higher conversion costs in this analysis; please contact us for a recent article on this topic if of interest.

Read the full story: http://bit.ly/China-Steel-production-EAF-producers

Read more about CRU: http://bit.ly/About_CRU

About CRU 

CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.

Since our foundation in 1969, we have consistently invested in primary research and robust methodologies, and developed expert teams in key locations worldwide, including in hard-to-reach markets such as China. CRU employs over 250 experts and has more than 10 offices around the world, in Europe, the Americas, China, Asia and Australia - our office in Beijing opened in 2004.

When facing critical business decisions, you can rely on this first-hand knowledge to give you a complete view on a commodity market. And you can engage with our experts directly, for the full picture and a personalised response.

CRU - big enough to deliver a high quality service, small enough to care about all of our customers.

SOURCE CRU