SHANGHAI, Oct 18 (SMM) - China has been long taking measures to prevent imported covid-19 cases and to contain the spread of domestic pandemic. However, the pandemic recently has made a comeback across the country.
Stricter measures to contain the spread of the pandemic
The number of newly confirmed cases in many places, including Inner Mongolia, Xinjiang, Shanxi, Guangdong and Shanghai, continued to rise, and the local governments have implemented temporary control measures in response. How will this round of pandemic affect the ferrous metals industry?
SMM survey on the impact of the pandemic on the ferrous metals industry
According to SMM survey, the pandemic was severe in Inner Mongolia and Shanxi, where the logistics has been hindered as truck transport was in shortage and railway transport was tight. The local steel mills had difficulties in receiving raw materials, such as coking coal, and in shipping the finished products. As a result, the in-plant inventories of steel mills accumulated.
In Anshan city, Shenyang city and Chaoyang county of Helongjiang province, the pandemic mainly disrupted the logistics, while the production in the steel mills have been basically unaffected. The inventory in Anshan was under lockdown, leading to halted shipment and pick-up, whereas the transportation was also suspended in Chaoyang County since the pandemic was severe there.
In Shandong, the transportation has been disrupted as well. The resource transportation in cities such as Linyi, Rizhao and Jinan was subject to stricter inspection. Some local steel mills had mounting difficulties in shipping finished products, thus the pressure on in-plant inventory accumulated slightly. The steel market in Tai’an city was also under pandemic-related restrictions, and the circulation of resources has slowed down.
In east China, Beilun District, Ningbo, Zhejiang Province has been under a temporary lockdown due to the sudden outbreak of pandemic. According to SMM survey, Zida warehouse in Beilun District, one of the major local steel markets, already suspended shipments due to the lockdown.
As for downstream enterprises, those in Lanzhou and Wuwei of Gansu province, Taiyuan of Shanxi as well as Tai'an of Shandong were most affected. All the indoor construction was basically suspended, and some construction sites were on lockdown.
Subsequent impact
SMM believes that this round of pandemic comback mainly affected the raw material and finished production delivery in Shanxi and Inner Mongolia, while the inflows and outflows of steel as well as the cross-regional circulation of resources were also disturbed in Anshan of Liaoning province, Tai'an of Shangdong, Ningbo of Zhejiang and Lanzhou of Guansu.
Specifically, the pandemic has resulted in tighter supply of coking coal as transportation in Shanxi and Inner Mongolia was hindered. The severe pandemic has prolonged the logistics time in some areas of Shanxi, and coking companies have suffered low coke inventories. Therefore, the prices of coking coal and coke are expected to rise in the short term.
In terms of steel, the trades in the domestic steel market have dropped compared to those before the holiday. The explanations for the decline included international bearish factors, disturbed market sentiment and the resurgence of pandemic in many places. In particular, the pandemic has affected the shipments of steel, the cross-regional circulation of resources and the operating rates of downstream enterprises.
Currently, there are signs that the pandemic is easing and gradually under control. In addition, the National Development and Reform Commission once again stated that "one size fits all" and "simplification" practices will be avoided in the pandemic prevention and control to ensure orderly operation and normal operation of enterprises, smooth flow of logistics as well as the safety protection of raw materials for energy. The market sentiment was thus boosted. SMM believes that the market transactions, resource circulation and downstream procurement will recover from the pandemic gradually, and SMM will continue to track the latest development.
