Hubei lockdown could lead to steel production plunge or suspension in central China

SHANGHAI, Feb 5 (SMM) – Steelmakers in central China may have to sharply trim output or even shut, if Hubei province remains locked down through March amid the epidemic outbreak.

The latest SMM survey showed that raw materials stocks at most of steel mills in Hubei are estimated to ensure production for about a month. Transportation restrictions keep raw materials and finished goods from entering or leaving Hubei, which is frustrating steelmakers in not only Hubei but also regions nearby.  

In 2019, crude steel capacity in Hubei and Hunan amounted to around 70 million mt, accounting for 5.8% of the nationwide total, according to SMM data.

Some Chinese steelmakers have decided to curtail production amid the coronavirus outbreak, including Maanshan Iron & Steel in Anhui, Laigang Yongfeng, Shiheng Special Steel and Rizhao Steel in Shandong, and mills in Shaanxi, Shanxi, Gansu and Sichuan.

While raw materials stockpiled ahead of the Lunar New Year holidays will help steel mills maintain normal production in the near term, stricter inspections at ports and road transport constraints are slowing shipments and growing chances of steel production curtailments.

The impact on mills located near ports would be less significant as Tangshan ports have reopened and ports in east China are also recovering.

Electric arc furnace (EAF) mills, meanwhile, are grappling with deep losses. A large number of EAF mills chose to stop production or delay their resumption.

China’s steel production looks unlikely to recover to highs seen last year in the short term, given announced plans of production cuts, a potential plunge in production in central China and EAF shutdowns.