Steel demand slumped in China

As reported by the World Steel Association yesterday, global steel production in January rose by 2.1% year-on-year to 154.4 million tons. The main reason for this was China, for which the association reports an increase of 7.2%. This is probably an estimate as the National Bureau of Statistics in China has not yet released data for January. At first glance, the increase seems somewhat high to us, as the Chinese New Year took place in January this year and China was paralyzed by the outbreak of the Covid 19 virus in the second half of the month.

The Association of Chinese Iron and Steel Manufacturers had reported only a moderate increase in steel production in the Middle Kingdom in January. It is said to have dropped noticeably since the beginning of February. For technical reasons, it is difficult for the operators of blast furnaces to shut down the production completely. A standstill is the last resort here. In contrast, electric ovens can be switched off and on again relatively easily. According to market observers, electric furnace operators have stopped their production; however, they only make up a small part of total Chinese steel production.

The virus has a significantly greater impact on steel demand in China: in the past few weeks, many construction projects have either been progressing slowly or not at all, so that there was hardly any demand for steel. S&P Global Platts estimates that the demand for finished steel products dropped 75% in February and 30% in March, which is likely to be below the previous year's level. Nationwide stocks of reinforcing steel have more than doubled since mid-January and are now at a record high.

Source: Commerzbank Research, Photo: Fotolia