Greetings from SEAISI!
In January 2020, as the world “woke up” from the New Year Celebrations and while the Asian communities were also preparing for the Lunar New Year Celebrations, an outbreak was gearing up in Wuhan, China.
As the drama unfolded, health authorities worldwide were stunned by the rapid spread of the coronavirus. As at 18 February 2020, more than 73,000 people have been infected and close to 1,870 have succumbed to the disease.
The race to contain this outbreak has resulted in unprecedented events, in the form of city lockdowns, travel restrictions and suspensions, suspension of businesses.
Impact on the Iron & Steel Industry
While the immediate impact was on the Tourism and Retail Industries, the Iron and Steel Industry is also facing disruptions.
Demand Side Impact
The lockdowns in China, quarantine and travel restrictions have major impacts on the Demand Side of the iron and steel industry.
The global Automotive Industry has been affected by shortage in parts, especially from China. Not only China’s automobile production is affected, elsewhere around the world, Volkswagen, General Motors, Nissan, Toyota, Hyundai, Renault, Fiat Chrysler are also facing supply disruptions.
The Construction Sector is another key consuming sector of steel affected by the epidemic. Not only is China a major exporter of steel, it is also a major exporter of construction materials such as façade, joinery. Contractors in many countries, such as Australia and South Africa, are bracing for delays in supply of materials, which may delay their projects.
China is also one of the world’s largest producers of various machinery and equipment. The supply of such machinery and equipment, which go into the construction, shipbuilding and many other sectors, are also disrupted.
A number of China’s Shipyards have remained closed although the extended holidays have ended. Similar to the automotive industry, regional shipyards, such as Japanese and South Korean shipyards are also feeling the effects of the outbreak on their supply chain for steel plates and equipment from China.
China is also a major source of Manpower Supply in terms of engineers, construction, shipbuilding and factory workers. Restrictions in place to quarantine and limit this manpower abroad will certainly impact industrial operations and construction projects around the world.
The first 2 months of the year are typically weaker months in terms of production and consumption of steel in China. Demand is not expected to be as severe as compared to other periods of the year. However, there is no doubt that global demand will be impacted as the event unfolds.
Supply Side Impact
Steel Supply Side is similarly affected.
Due to lockdown and restricted movements, a number of China Ports are operating at low capacities. Ports along the waterways of Yangtze river are critical transport routes for supply of iron ore to the inland steel mills.
The Shipping Industry has reported that a number of ships are also stuck outside China, waiting to transfer steel and steel industry related materials (such as iron ore, coking coal). However, it is still not clear how severe is impact of material supply on the Chinese Steel Industry in the longer run.
In the meantime, most Blast Furnaces in China are continuing to churn out steel products through the Lunar New Year. While this will mitigate any short supply in China to a certain extent, the supply to the rest of the world remains a concern, especially to countries that rely on Chinese made steel.
All in all, while global supply chain is being disrupted, the Chinese Government is putting in drastic controls to contain the spread of the coronavirus. Whether the impact is going to be severe or less so, will depend control of the situation and its eventual recovery.
A Side Note for Thought:
Considering that China produces half of the face masks in the world, the outbreak has created a worldwide shortage in masks. What do you think, if the same situation happens to steel? That is why a strong, local steel industry is essential in any country. Think about it!
Sympathy and Prayers
In the meantime, we would like to express our sympathy to the Chinese people and to those affected by the outbreak and we pray for the speedy containment of the epidemic and for the quick recovery of the affected people.
To all our members, please practice hygiene and vigilance as advised by the medical experts. Stay safe.
YEOH WEE JIN