Almost 20 days have passed since China’s National Health Commission started giving daily updates of the status of the Novel Coronavirus Pneumonia (NCP) outbreak, and like the virus itself, the impact of the contagion is by no means confined to China alone. Many ferrous market participants out of China are on edge, concerned about what kind of ripple effect they should brace themselves for because of the outbreak, now still Wuhan in central China’s Hubei province as the epicentre. On February 3, the first day when China was supposed to be back at work from the extended Chinese New Year holiday on February 2, I spoke with four contacts from four different locations in Asia outside China including Taiwan, Hong Kong, India and South Korea, each of whom asked me similar questions regarding the impact of the NCP outbreak. Chiefly, they wanted to know what China’s demand for steel and iron ore had and would be like, how badly the market dynamics of both had been affected, and whether Chinese steel mills, being
unable to sell to domestic customers, would again intensify their efforts to export steel to other markets in Asia to fill up the gap. How I felt there and then fielding these questions is really hard to describe. On the one hand, many of my friends and Mysteel colleagues in China are caught up in the fierce battle the country is fighting against the virus when the government even resorted to an unbearably harsh decision to lock down Wuhan to minimize its spread. On the other, my ferrous market sources outside China were concerned about how much steel would be forced out of the country in response to dwindling home-market demand. The worries of my industry contacts were totally understandable as their immediate concern, especially when the virus seemed so remote from their daily lives, was about how much of their business would be affected. But back then on February 3, it showed how the virus outbreak was being underestimated by the people outside China, and how traumatizing it could have been. My answers to my contacts’ questions were quite similar: “it’s still early days to estimate the impact, as we still know little about the nature of the virus, and how quickly health authorities might be able to bring it under control. China has prioritized the transportation of crucial materials such as medical supplies and daily necessities such as vegetables and other agricultural products to support the lives of the people in the affected areas”. For central and local governing authorities in China, the transportation of industrial products such as steel or iron ore at this time is not high on the agenda. China’s ferrous sector is facing a seesawing situation where both demand and supply are being dampened because of the virus, and it is hard to say which side will win out in the end. “Even if Chinese steel mills were keen to export their steel and had been successful at finding overseas buyers, to conclude the business they would have to find a truck with the driver that was able to move their cargoes all the way from their plant to the nearby port without being stopped because the highways have been blocked. As of now, this sounds very challenging,” I explained to my South Korean source. My Hong Kong source was the exception as she would like to ship steel from China but could not. “We booked cargoes from Chinese steel mills to sell to our customers globally, but because of the virus outbreak, all of sudden, I am running the risk of defaulting on my contracts, as my suppliers in China may very well not deliver because of the transportation disruption,” she said with concern. “And I can’t find replacements in such a short period of time, as the steel items I have ordered from China are not commercial-grade for common use,” she shared. As of February 9, China had 40,171 confirmed cases of people afflicted by the virus, with 3,281 cured and 908 deaths, and a further 23,589 cases nationwide suspected of carrying the virus, according to the official data. This is in sharp contrast to the 219 confirmed cases and 54 suspected cases as of January 20. February 10 was supposed to be the date when normal order should resume in China, and many construction sites were to return to operations according to local authorities’ notices. However, whether this has been realized remains a question, as many companies in China have asked their employees to work from home or rest for another week until past mid-February. The possibility of huge crowds of people moving around cities again in China also presents a great risk and may be too early too, when the virus spread has yet to be confirmed as under control. Ferrous market sources in Asia outside China including me, thus, will probably have to closely monitor China’s ferrous market for a while longer to assess the degree of the impact of the epidemic.
Source : https://www.mysteel.net