The coronavirus outbreak has fueled plenty of fear and dramatic measures — including extending China’s Lunar New Year break to February 9 in some regions and February 13 in Hubei — but its emergence during the holiday period means seasonally slow demand in China may absorb much of its downside impact on metals markets — although it is already certain to result in a weaker-than-usual first quarter.Steel mills keep blast furnaces operating during the holiday, but February is typically the weakest month for metals output in China. Trading in iron ore, coking coal and alumina slows or stops entirely as restocking mostly occurs in the run-up to the holiday.Construction activity also winds down in January and February due to severe weather, particularly in northern China, and migrant workers returning to home towns for the holidays. The question this year is, how long will they remain there?Business and construction activity is currently slated to restart February 10 in Beijing and Hunan, Zhejiang and Hebei
provinces, but in cities in Shanxi, Tianjin and parts of Sichuan, a restart date has yet to be announced.The other question is: How will workers return to their jobs? Long distance buses remain suspended in many provinces and there is plenty of disquiet about them potentially returning with the virus. And do workers want to return? S&P Global Platts has heard many examples of traders and construction workers sayingthey may only return mid-February — and only if the outbreak doesn’t get worse.Restrictions on gatherings also appear likely to curtail manufacturing and construction activity. Chinese media has widely publicized the cases of a company in Zhejiang province that held a meeting of 30 people, 11 of whom later tested positive for the virus, and a gathering of six school friends, one of whom had the virus and infected the others. This has naturally engendered suspicion and prompted many people to remain indoors, which will likely have a negative impact on China’s economic growth in Q1.
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