Corona Pandemic To Delay Steel Sector Revival

Just when the steel makers started celebrating sector revival set in motion since November with successive rounds of price hikes, the coronavirus pandemic that continues to spread its tentacles outside China, has played spoilsport and could delay any long term and sustained revival in demand and prices of steel.

- Sumit Maitra

“With the majority of steel price hikes behind and Covid-19 issues still unresolved, we believe there is more downside for steel prices in the near term. We expect demand revival to be sluggish in the near term,” Emkay Research said.

ArcelorMittal believes the effect of the coronavirus will likely have a short-term negative demand impact in China and to a lesser degree elsewhere. Even as Chinese plants reopen and production resumes though not in full capacity, subdued demand and halted logistics have led to significant scale up of stocks which China would now try to dump on markets like India which is seeing revival of demand.

“Weak global steel demand and any increase in exports to India, possibly due to the impact on the global economy if COVID-19 prevails for a prolonged period, present risks,” Fitch Ratings said.

Stocks of steel in China touched about 23.75 million by end February, highest since 2006 as per reports.

However, some benefits are also expected on softer imported coking coal and international iron ore prices.

ArcelorMittal’s current view is that the vast majority of the impact on the first quarter of 2020 demand is expected to be recovered throughout the remainder of the year and its perspective on the fundamentals of the Chinese steel market remain unchanged.

“However, the recent increase in cases outside China is worrying and increases the risk of a global pandemic and a much larger negative impact on global GDP. The Company is monitoring the situation closely and in particular in Italy, as should the virus spread more widely through Europe this will likely have a material impact on the Company’s sales and profitability in 2020,” ArcelorMittal said.