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Virus outbreak slows down China’s steel production

A number of Chinese steel producers have opted to scale down their crude steel production by conducting maintenance on their furnaces as the counter measure against the market quietness because of the Novel Coronavirus (2019-nCoV) outbreak, Mysteel understood from related surveys.

Mysteel’s latest tracking on the 138 blast furnaces in Tangshan, the top steelmaking city in North China’s Hebei province, for example, showed that 42 furnaces had been on maintenance as of February 5 and their capacity utilization fell 0.75 percentage point from February 2 to about 80.2% as of Wednesday, though it was still 3.25 percentage points higher than a year ago.

Over February 3-5, “we have confirmed another nine blast furnaces have been idled for maintenance and more steel mills in Tangshan are considering doing so not only about their blast furnaces but also their rolling mills,” a Mysteel analyst explained.

China’s steel market usually shows strong signs of recovery after the Chinese New Year holiday but for this year, the virus outbreak has sent the domestic steel market into a deep lull, as most of the construction sites in China have been ordered to remain shut until after February 10 as part of the efforts to battle against the virus spread. Some local authorities in China have delayed the resumption of their construction site until early March because of the intense fighting against the epidemic.

Other than the steel mills in Tangshan, seven steel producers in East China’s Shandong province also confirmed planning to scale down their production as of February 3 with six having already executed the plan, as one curtailed its blast furnace capacity by 40%-50%, a few had completely halted their converters and rolling lines, and the others rotated the halts among their related facilities, Mysteel’s other survey showed.

Affection on the steel output in Shandong, thus, is estimated at 500,000 tonnes and above for February, though the volume may increase further should more mills in Shandong decide to adopt similar practices, Mysteel understood.

The ongoing fierce battling against the 2019-nCoV has affected China seriously in all aspects, and most of the Chinese steel mills have been working out solutions to minimize the impact on their production and steel business, Mysteel Global understands.

On the one hand, Chinese steel mills have to slow down their production amid almost non-existing demand, as “there is still indefinite when the downstream enterprises will resume operations, and the demand recovery (after the holiday) has surely been delayed and mills are obviously under severer pressure with rising inventories and capital constraints,” a Tangshan industry source commented.

On the other hand, “there has been disruption in raw material supplies as transportation has been strictly monitored and controlled by the government both on road and by rail to prevent spread of the virus,” he added.

“Currently, the orders we have on hand are limited but our finished steel has been piling up and margins shrinking with price drops,” an official from a Shandong-based mills commented, confirming too that it has been difficult to move raw materials to the works from the ports because of transportation restriction, both of which prompting them to cut down on production.

Beijing started the daily update of the virus outbreak since January 21 and by the end of February 5, there had been 28,018 confirmed cases and 24,702 suspected cases, with the cures reaching 1,153 and deaths 563 in China’s 31 provinces, autonomous regions, and special administrative regions though the epicentre has remained in Wuhan, Central China’s Hebei province, according to the latest release from China’s National Health Commission.

Written by Olivia Zhang, zhangwd@mysteel.com

Edited by Hongmei Li, li.hongmei@mysteel.com