Market Segment

CRU: Steel Prices Stall as China Starts to Return

February 16, 2020

China has begun a mass return to work following the Chinese New Year holiday that was extended due to the outbreak of the novel coronavirus (recently given the official name Covid-19). Labor and logistical constraints have hit the steel industry across the whole value chain from the supply of raw materials through to steel demand at end users. The restricted movement of people and trucks have severely curtailed activity in steel consuming sectors, lowering steel consumption.

Market insight picked up by CRU’s team of analysts in Beijing and Shanghai shows that so far, production has been affected less. This has resulted in a large buildup of inventory that is beginning to paralyze the steel industry value chain.

China is the single biggest steel market and steel producer in the world, so the effect of a major disruption to the domestic market is likely to ripple through global markets. The extent of the impact to global markets will depend on the ability of Chinese producers to export—logistics constraints and costs may be limiting factors, although the chances of a quick “fire-sale” are high.

CRU will address these points over the next week with a new price forecast on or before Feb. 21, supported by an Insight examining supply and demand factors on price in more detail.

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