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China’s steel production unaffected in flooded regions

China has raised the flooding alert to orange from yellow since July 12 with historically high water levels at many rivers and lakes, but so far steel mills in the affected provinces in East, Central and Southwest China have been operating as per normal, and have taken extra preventive measures, market sources shared on Monday.

As of 0800 (Beijing time) on July 12, along the Yangtze River, 13 checkpoints had detected historically high water levels, 11 with the water levels higher than normal, and 88 points with water levels above the safety level, facing risks of flooding anytime, according to the Xinhua news report.

China’s East and South China have been into the wet season since June 8, and the torrential rainfalls since July 4 had flooded provinces in East, Central and Southwest China including Jiangsu, Zhejiang, Anhui, Jiangxi, Hunan, Hubei, and Chongqing by last Sunday, according to the Xinhua.

Jiangxi, the worst-hit province among all, has raised its flooding alert to red, or the riskiest level since July 11, and by 1700 (Beijing time) of July 11, over 5.2 million local citizens had been affected with 432,000 to be evacuated, and direct losses estimated at Yuan 6.5 billion ($928 million), or far more serious than a year ago on July 16 2019 when the province had 1.3 million local citizens affected by the flooding and faced direct losses valuing Yuan 2.8 billion, according to the Chinese media reports.

Picture: Jiangxi Poyang County; Source: chinanews.com

By Monday, steel mills even in the flooded provinces have confirmed little affection on their daily operations, Mysteel Global understands from mill officials.

“Our production has been running as per normal, but transportation of raw materials by ships, especially iron ore, has been delayed by two or three days because of the flooding,” an official from a steel mill in Jiujiang of Jiangxi confirmed.

“Water level has stayed high, and the rainy and flooding season is not over yet, so we need to enhance the communication and coordination with people in our value chain including port officials to guarantee adequate raw material supplies,” he added. Jiujiang, near Poyang Lake, is one of the most seriously flooded areas in Jiangxi, Mysteel Global understands from the Chinese media reports.

Elsewhere, steel mills have been taking precautionary measures against any possible flooding, and Wuhan Iron & Steel, a subsidiary of China Baowu Steel Group in central China’s Hubei, for example, has asked its rescue team to build up barriers with sandbags at its mining sites to fend off any rising water.

Summer tends to a season of heavy rains and flooding in East and South China, and floods usually occur in small villages and towns because of the limited draining networks compared with cities, but steel demand even in cities is usually dampened as many construction sites have to be suspended in heavy rains and flooded areas for safety concerns, Mysteel Global understands.

“Floods are not as serious in the inland areas as those along the waterways,” a steel trader from Nanchang, the capital city of Jiangxi province said, but their local construction works have been impeded and steel sales have been poor, he admitted.

“Construction sites usually need one or two days to clear the water puddles on the sites, but another rainfall may soon come after the water is cleared, put all their efforts in vain…It just doesn’t work (with the wet season),” he observed.  

Over July 1-10, spot construction steel sales including rebar, wire rod, and bar-in-coils among the 237 Chinese traders averaged 231,808 tonnes/day over July 1-10, up 2% on month, and the trend appeared similar in the flooded East China, mainly as China’s steel market sentiment has improved together with the optimism on China’s macro-economy for the latter half of 2020, and steel traders have been restocking, speculating on higher steel prices in the coming months, as reported.

Written by Olivia Zhang, zhangwd@mysteel.com, and Hongmei Li, li.hongmei@mysteel.com