How will the novel coronavirus affect the steel industry?
An outlook for the first quarter of this 2020
Since the situation is evolving rapidly and somewhat unpredictably, some of the information in this article might be already outdated at the time of your reading.
A race to contain the virus
February 11, 2020 - The novel coronavirus (2019-nCoV) has already caused 1,018 deaths and infected more than 43,104 globally (relying on the official numbers released by the Chinese Government). The virus has spread beyond China to more than 25 countries and territories since the first outbreak in the city of Wuhan, located in the Hubei province (CN) in December.
Xi Jinping, President of the PRC, has introduced strong measures to contain the spread of the virus, extending the Chinese New Year Holiday and restricting transportations. About 60 million people are currently under lockdown, as international researchers race to develop a vaccine and put an end to the epidemic.
What effects is this global crisis going to have on the steel industry in the short term?
The coronavirus outbreak in Wuhan has coincided with a period when seasonal demand is already traditionally weak, with most people working in the construction, manufacturing and infrastructure industries on holiday.
As highlighted by CRU, all countermeasures and restrictions introduced by the Chinese Government to suppress the infection “are likely to disrupt supply chains and production output in affected areas.”
Some of the related sectors are already suffering from the recoil: Mike Manley (CEO Fca) announced in the past few days that due to the supply from China being interrupted, one of their major production facilities in Europe may be shut down.
The situation is also affecting trade shows and conferences, there is a lot of concerns from both exhibitors and visitors who are hesitant to attend busy events, both in China and in the rest of the world: for example, the UL and IWCS China 2020 Cable & Connectivity Symposium, previously slated for March 24-26 in Shanghai, was cancelled.
However, the British business intelligence company reassures that: “the effect on steel demand so far is limited, as most construction activity does not restart until after the Lantern Festival” - which this year was just a couple of days ago, on 9 February - editor’s note - “Construction is the biggest sector driving China’s 2.6 Mt of steel demand per day or 15-20 million tons per week”.
Read the full article by CRU here >>
We will see how things develop in the long run, though we must point out that a prolonged disruption in relevant sectors can’t but exacerbate the inevitable slowdown this year.
Heavy repercussions on the global economy
Concerns and problems regarding the coronavirus outbreak are not limited only to the steel industry. There is a large amount of uncertainty (and fear) regarding the impact of the virus on the global economy. Many sectors are expected to take a hit, from the methanol markets, to the oil markets, to even fashion!
BBC states that, following WHO’s declaration of global health emergency, many big companies such as Airbnb, Google, Apple, and Amazon just to name a few, have decided to suspend their activity in the country indefinitely. Business travels have also been canceled for precautionary purposes, encouraging all employees to follow health and safety guidelines and work from home.
If we really want to find a silver lining here, the pharmaceutical sector is growing considerably, with face masks market actually developing as a real side market (though experts actually haven’t confirmed their effectiveness against the virus). Other sources also report a spike in demand for Ford Transit van-based ambulances.
It is undeniable that Coronavirus is having a huge impact on major aspects of our society, undermining our economy and disrupting our habits. Though how many of these consequences are actually caused by the virus and which ones are instead the result of disinformation and hysteria is yet to be determined.
Photo by worldsteel/ Shawn Koh
