Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

China is hit by coronavirus outbreak amid Chinese New Year celebrations. At the epicentre of the outbreak is the steelmaking city of Wuhan, in Hubei province. From Wuhan, the virus has spread to Beijing, Shanghai, as well as Taiwan, Macau, South Korea, Japan, Thailand and the United States. Coronavirus has caused 17 deaths in Hubei, in Central China. 


In a rare directive, the Chinese government has lockdown five cities in Hubei province; namely, Wuhan, Hunaggang, Jingzhou, Xianning and Chibi. Authorities have shut all public transportation in these cities. People are not allowed to travel from or to these cities as well as. Hubei state has advised residents to avoid crowded place and stay indoors. 


Hubei province is an industrial hubs. Hubei produced 38.7mn mt of crude steel in 2019. Wuhan Iron & Steel group, Xiaogan Jinda Steel& Iron, Wuhan United Iron & Steel, Hubei Danzhan Steel & Iron, Hubei Xinyegang Steel, Shiyan Hudi Metal Tube and Wuhan Juli Steel are some of the steel companies based in Hubei.


Many steel mills in China have halted production for New Year holidays and most steelworkers have returned to their hometowns. Mills in Wuhan will remain closed for at least a week companies, and these are planned closures which are not likely to impact overall steel production. 


As a safety measure, Japanese companies, which operate joint venture companies in China, including Kobe Steel, Nippon Steel, JFE Steel and auto companies, including Honda, Nissan, Mitsubishi have issued travel-ban to their employees in Wuhan. 


On the other hand, China’s steelmaking hub, Hebei province issued a notification on Wednesday that the spread of coronavirus will not affect the region’s steel output. Hebei’s health department is enforcing strict measures to prevent and control the spread of the virus. 


Demand outlook

Coronavirus outbreak could lower the overall steel demand in China. If the virus spreads further, construction activities which pick up post-Lunar New Year holiday will slow down, in turn, impacting steel demand. The situation could worsen in the coming months and China’s growth is expected to experience increased downward pressure, particularly in the services sector, said an analyst at Nomura.

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