Impact of the Wuhan coronavirus on the steel industry

The Wuhan coronavirus outbreak has led to an extension of the Chinese New Year holidays and the imposition of transportation restrictions to contain the spread of the virus. Demand is usually weak during this period, but production continues as usual. Every day, lost activity in China could drop demand by 2.5-3.0 million tonnes, and restrictions on transportation could disrupt supply chains and output in affected areas.

Process history
In just 13 days from January 16, the number of people infected with the coronavirus in China has risen from 45 to nearly 6,000, plus over 9,000 suspected cases. The death toll reached 132 on Wednesday 28 January, with confirmed cases in 12 other countries, including the United States, Japan, France and Singapore.

More than 60 million people in 13 cities in China have been completely or partially blocked since the virus outbreak. In addition, the Chinese government has extended the Chinese New Year holidays to delay mass migration of people back to work. In Shanghai and nearby Suzhou in Jiangsu province, the vacation period has been extended to 9 February. The only industries that are still in operation are on the exclusion list: gas, water, power, telecommunications, medical technology, pharmaceuticals, and basic necessities including supermarkets, food processing. In the past three days, more and more areas outside the epicenter of Hubei are now taking measures to restrict the movement of people.

Steel demand will be lower in the short term

Already weak seasonal demand is likely to continue to slow in China due to measures aimed at reducing the spread of the virus, including extending vacation periods and limiting infrastructure.

The spread of the coronavirus coincides with the CNY holiday, a period when steel demand in China is particularly weak as most people working in construction, manufacturing, infrastructure and logistics are on vacation. However, the impact on steel demand is still limited as much of the construction activity only resumes after the Lantern Festival, which will take place this year on February 9th. Construction is the largest sector, providing 2.6 million tonnes of steel in China, or 15-20 million tonnes per week.