Sharp growth in Chinese steel stocks impacts Korean steel industry

China's steel inventories rose to a record high, putting pressure on Korean steelmakers.

The Korean steel industry is struggling with the spread of the COVID-19 virus. Steel inventories in China have risen to a record high due to delays in production and construction, and Chinese steelmakers are cutting prices to cut their inventories. To top it off, demand for ships and cars has declined, making the outlook for the steel industry grim.

According to sources in the steel industry on March 10, the rate of industrial recovery in China was only 58.9 percent. On March 10, 7,326 construction projects in China had an efficiency rate of just 10.2 percent, according to sources in the steel industry. Twenty-five percent of companies that have reopened and 48 percent of companies that have been unable to reopen are reportedly struggling with labor and inventory shortages. Due to the slow recovery in processing industries, China's steel inventories stood at 23.75 million tonnes, the highest level since 2006.

Domestic steel producers are also suffering from the deepening downturn in the steel industry. Producers have begun pushing higher prices due to soaring material prices in 2019, but the coronavirus outbreak and low oil prices are undermining their push for higher prices.

The spread of the COVID-19 virus has disrupted Hyundai Motor's supply chain and reduced plant utilization. The shipbuilding industry is constantly demanding a freeze or reduction in steel prices. In fact, POSCO and Hyundai Steel aggressively pushed for a price hike for hot rolled steel in March, but focused on maintaining prices as demand declined.