The corona virus outbreak in Wuhan city at the beginning of 2020 had a significant impact on domestic transportation and the resumption of work in steel mills. But in general, the impact of the epidemic on the steel production side is less than that on the demand side, and the steel industry's production remains good. During the epidemic, the demand for downstream steel decreased significantly, steel stocks increased rapidly after the Spring Festival, and steel prices fell.

As a raw material production and supply industry, the purpose of resumption of production and production is to meet the downstream demand for steel. On the whole, there is no problem in meeting demand at present and in the future. Luo Tiejun, vice chairman of China Iron and Steel Industry Association, member of the epidemic response leading group and leader of the market stabilization working group, said at the meeting.

After the outbreak of the pneumonia epidemic, the Party Committee of the China Iron and Steel Industry Association resolutely implemented the decision-making arrangements of the Party Central Committee and the State Council, worked hard to respond to the epidemic, stabilized the market, and guides enterprises to actively and safely resume work and resume production.

Luo introduced the current situation of production and stop production of iron and steel enterprises, especially long-flow production enterprises. At present, iron and steel enterprises that account for 90% of the country ’s crude steel production are mainly blast furnace-converter long-flow enterprises. Hot-line continuous operations are not stopped on holidays. The impact of the epidemic is not a problem of resumption of work, but of overcoming the problem of continuous safety production due to the obstruction of logistics. As of February 21, the operating rate of member companies of the China Iron and Steel Association was 96%. Long-flow iron and steel companies have basically maintained production. Most of the electric furnace steel mills, which mainly produce construction steel, have ceased production, including Hubei, Sichuan, Chongqing, and Guangdong. Provinces such as Zhejiang, Zhejiang and other provinces and cities were affected by the shutdown of electric furnace enterprises and the operating rate was less than 35%.

Affected by the epidemic, many provinces and cities across the country announced that they have postponed resumption of work, and the start of construction of major steel industries such as construction, machinery, and shipbuilding has been postponed. The status of orders from steel mills can also reflect the downstream demand situation. The China Iron and Steel Association pointed out that in the three weeks after the Spring Festival, the steel industry has been affected by the epidemic and steel stocks have risen sharply and steel prices have fallen.

In early February, the steel industry's key statistical enterprise steel inventory was 18.51 million tons, an increase of 5.45 million tons from the previous period, an increase of 41.7%; an increase of 8.98 million tons, an increase of 94.2%.

From the perspective of social inventory, in the past 2-3 weeks after the Spring Festival holiday, the social inventory peaked, and it is expected that the peak inventory level this year will be higher than before. In early February, the social inventories of 5 major steel products in 20 cities totaled 14.71 million tons, an increase of 6.52 million tons over the previous month, an increase of 79.6%, and an increase of 7.79 million tons, an increase of 115.7% over December.

From the perspective of steel prices, this week's (February 17-21) China Steel Price Index (CSPI) was 100.55 points, down 1.40 points month-on-month, 4.93 points lower than before the holiday, and 3.31 points lower than the first week after the holiday, and lower The lowest level in 2019 is 104.28 points.

China steel price index

Regarding the future trend, the China Iron and Steel Association has the following preliminary judgments: Steel mills are increasing their efforts to reduce output. Against the background of high inventory, reduced demand and obstructed logistics, steel mills will further reduce their output in the short term. According to statistics, as of February 21, 73 blast furnaces have been shut down or overhauled, which is expected to affect 210,000 tons of hot metal production per day. Inventories remain high in the short term. The demand in the first quarter will be greatly reduced compared with the same period of last year. It is difficult to digest the high inventory, and the steel mill and social inventory will increase in the short term. Downstream demand will start as the outbreak improves. With the gradual improvement or end of the epidemic, the impact on the steel industry will gradually weaken. The steel demand is expected to rebound rapidly from the second quarter.

Xinyue production line has begun production for a week. If there is a recent demand for the purchase of steel pipes, it is recommended to determine the contract details as soon as possible and pay the deposit and keep price.

Written by Phebe