Final Thoughts

Final Thoughts

Written by Tim Triplett


Economists are fond of saying, “when the United States sneezes, the rest of the world gets a cold.” Where goes the world’s largest economy, smaller economies follow. Likewise, China, the world’s second largest economy, has come down with a particularly nasty bug that is threatening the health of global commerce.

By now most are familiar with the novel coronavirus, also known as Covid-19, that has tragically disrupted life in China. To date, the virus reportedly has infected more than 75,000 and claimed the lives of more than 2,000. To stop the spread of the flu-like virus, the Chinese government has taken extreme measures to control the movements of millions of people, putting a strain on the Chinese economy. Workers who had been ordered to stay home to prevent the spread of the disease are now beginning to return to the nation’s businesses and factories. Health officials in China and the rest of the world will be watching closely in the coming weeks to see if the virus has been contained as commerce gears back. 

As our colleagues at CRU are reporting, the restricted movements of people and trucks have severely curtailed activity in the manufacturing sectors, lowering Chinese steel consumption. Steel production continues, however, in the nation largely reliant on always-hot blast furnaces. The result is a large inventory buildup that could overhang the market through much of the second quarter.

The Chinese will have a big incentive to export the problem and find a home for their oversupply, which could have a ripple effect through world markets and likely drive down the global price of steel.

CRU is working on a new price forecast that it plans to publish on or before Feb. 21 that will explore the supply/demand effects of Covid-19 in more detail.

Should the Chinese fail to control the deadly virus soon, the impact on global commerce could prove to be more than just a minor case of economic sniffles.

The effects of the coronavirus on the economy and steel market should be more clear by August, when the black swan event will no doubt be a topic of discussion at Steel Market Update’s Steel Summit Conference, set for Aug. 24-26 in Atlanta  You can register by clicking here or by going to the website address www.SteelMarketUpdate.com/Events/Steel-Summit.

There’s still time to register for the SMU Steel 101: Introduction to Steel Making & Market Fundamentals Workshop March 31-April 1 in Merrillville, Ind. The workshop includes a tour the NLMK Portage steel mill. You can register for the conference by clicking here or by going to www.SteelMarketUpdate.com/Events/Steel101

As always, your business is truly appreciated by all of us here at Steel Market Update.

Tim Triplett, Executive Editor

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Final thoughts

Last week was a newsy one for the US sheet market. Nucor’s announcement that it would publish a weekly HR spot price was the talk of the town – whether that was in chatter among colleagues, at the Boy Scouts of America Metals Industry dinner, or in SMU’s latest market survey. Some think that it could Nucor's spot HR price could bring stability to notoriously volatile US sheet prices, according to SMU's latest steel market survey. Others think it’s too early to gauge its impact. And still others said they were leery of any attempt by producers to control prices.