Coronavirus appears in South Korean steel mills

The Korea Times reported that POSCO, Hyundai Steel and other steelmakers have announced a cut in steel production as the spread of the coronavirus will severely reduce not only production but also demand. Yuanta Securities analyst Yi Hyun Soo said, “The original forecast was that POSCO will see a recovery in the first half as steel product distribution improves and the US-China trade dispute will also be eased. However, the impact of the virus is likely to be more severe than initial expectations, leading to a slowdown in price growth, demand and POSCO recovery.

Any attempt to increase steel production in China will provide new impetus for South Korean steelmakers to see a marked recovery in the second half of this year. The likelihood that the Chinese government will take any measures to restore its economy in the near future is very high, and the steel-using industries will be at the center of these measures. While timing of these measures is difficult, there is a high likelihood of recovery in the steel industry. ”

Another industry representative said, “Customers set their own annual production plan. If there is a decrease in output in the first half of the year, they increase production in the second half to meet the annual target. It depends on the progress of COVID though. Given the situation in metallurgy, in the second half of the year, demand is likely to show a sharp recovery ”.

Due to possible stimulus measures from the Chinese government, many expect a V-shaped rebound in earnings as China's downstream industries are expected to get back on track.