Chinese domestic prices suffer heavy falls on building steel inventory levels and persistent first-quarter demand worries, with rebar facing the toughest challenge.
Supply and stocks
Steel inventories started accumulating in the week of February 6, according to domestic data. Inventory levels are expected to continue building if steel mills are not able to deliver cargoes to end users in the face of trucking and travel restrictions. Exporters also not able to bring cargoes from steel mills to ports for export. Northern Chinese steel mills mulling production cuts in the first quarter, depending on speed of recovery of demand after outbreak. No confirmed news of Chinese steel mills making use of the force majeure certificates issued by the China Council for the Promotion of International Trade, although market participants are not ruling out possibilities of this.Demand
Steel demand expected to shrink in the first quarter of 2020 due to weak downstream, in sectors like building, construction and machinery, as any ramp-up will take time after the virus outbreak. Steel producers will cut production rates accordingly, sources said. Rebar producers expected to be the worst hit so far because building and construction sites are at complete standstill and China's rebar is almost totally domestically-consumed. This is due to the fact that construction sites typically have many workers working in close contact with each other. In HRC and structural steel, exports still heading out to rest of the world.Price since outbreak began
Domestic China Steel prices tanked on the first day after the Lunar New Year holidays ended, recovering marginally over the next few days. A bearish trend is expected to continue. Steel reinforcing bar (rebar) domestic, ex-whs Eastern China: 3,400-3,450 yuan per tonne on February 3, down 6.3% from January 23. International steel and scrap prices started on a downward trend, with no sign of recovery soon. Some panic selling heard at very low prices; traders heard to be attempting to liquidate their long positions quickly regardless of losses. Steel scrap HMS 1&2 (80:20 mix) North Europe origin, cfr Turkey: $251.02 per tonne on February 5, down 8.5% from January 23.See also - Coronavirus impact on key parts of the steel supply chain:
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