China’s warehouses have racked up record levels of steel as the coronavirus outbreak has brought construction and manufacturing, which account for more than half of global demand for the material, to a standstill.
Steel makers and traders held a total of 34.3m tons of finished steel products – the highest level ever recorded – as of February 20, according to Shanghai-based industry data provider Mysteel.
In a press conference on Sunday, the China iron and steel association warned that mills should actively cut back on production or risk causing oversupply and rising debt levels in the industry.
China’s steel mills usually run through the Lunar New Year holiday at a minimum output to avoid the high cost of restarting idled blast furnaces. This leads to an annual build-up of inventory.
This year, however, government curbs on travel restrictions and curbs on business, aimed at stemming the spread of the virus, have led to extended shutdowns of China’s construction sites. As a result, only 10 per cent of 7,326 projects have restarted, according to a Mysteel survey.
In the past, oversupply of Chinese steel has pushed global prices down and led to dumping of Chinese products in global markets, putting pressure on manufacturers.
Australia’s BlueScope Steel has warned its business in China would be “heavily impacted” by the spread of the coronavirus and blamed shrinking steel prices for a 70 per cent slide in net profits in the first half of 2020.
The country’s biggest steel-maker warned of uncertainty in key markets due to the impact of the coronavirus. BlueScope shares fell by as much as 10 per cent following the announcement.