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Coronavirus to delay steel demand recovery while production goes on
Jan 31, 2020 10:58CST
Source:SMM
A potential demand recovery delay is set to weigh on prices of steel in the short term

SHANGHAI, Jan 30 (SMM) – Demand for steel in China after the Lunar New Year holiday looks set to recover later than previously expected as the Chinese local governments have decided to extend the holidays to contain the rapidly-spreading novel coronavirus.

Authorities of cities or provinces including Shanghai, Beijing, Guangdong, Fujian, Zhejiang, Jiangsu and Chongqing, have announced that enterprises are not to resume work earlier than midnight on February 9. That came after the nationwide extension of the Lunar New Year Holiday by three days to February 2. Northern regions like northeast China and Hebei where see a low degree of population mobility, will follow the nationwide extension to February 2.

A potential demand recovery delay is set to weigh on prices of steel in the short term, as steelmakers have kept their blast furnaces running during the holidays. SMM conducted a survey to assess the impact of the holiday extension on the whole steel industry.

Iron ore: In-plant stocks to ensure production through mid-Feb

Inventories of the steelmaking feedstock at Chinese mills are expected to satisfy demand through February 8, thanks to amply stockpiling ahead of the holidays. Iron ore stocks at Chinese ports have accumulated during the holidays, suggesting sufficient supply for steel mills’ replenishing their stocks after returning from the holidays. Ports in Tangshan are currently shuttered and will remain so until further notice.

MMi Daily Iron Ore Seaborne Index Prices for January 29

IOSI62 - 62% Fe fines, CFR Qingdao: 87.25 USD/mt (0.58%)

IOSI65 - 65% Fe fines, CFR Qingdao: 101.85 USD/mt (0.44%

Steelmakers: Blast furnaces keep running, while EAFs, re-rollers to delay resumption

Most blast-furnace steelmakers will follow the nationwide holiday extension, recovering operations on February 3. Operating rates at electric arc furnace (EAF) steelmakers and re-rollers, however, are likely to take a hit from the coronavirus outbreak, as such steelmakers are mostly located in east, south and central China where saw a bigger number of confirmed virus cases and stricter control.

Traders to postpone their return to the markets

Traders in south China and other regions where are more severely affected by the epidemic, plan to return to the markets on February 10, while those in the north where feel less severe impact, will resume operations on February 3.

Downstream consumers: Manufacturers to extend holidays

Comparing to construction, demand for steel from manufacturing is more likely to take a hit from the holiday extension. Under their original plans, most construction sites would resume operations after February 8, while manufacturers of home appliances, cars and other products planned to resume work from January 31.  

Transport: Trucks, shuttle vessels under restrictions

Road transport is the worst hit by the epidemic outbreak which has led to the closure of roads, while ship transport feels the impact with people kept from travelling back to work. Rail transport, except for routes that pass Wuhan, is limitedly affected.

Coronavirus
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