Global steel giant ArcelorMittal fears that the coronavirus emergency spreading across the world may have an impact on its sales and profitability in 2020, the company said in its annual report. Although the company believes there are signs that the real demand slowdown is beginning to stabilize, and that the supportive inventory environment is boding well for the apparent demand outlook, this may be revised downwards due to the impact of the coronavirus outside China.
"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," said ArcelorMittal, adding, "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 expects Chinese steel demand to grow in 2020 within a range of zero to one percent (versus estimated growth of 3.2 percent in 2019) driven by robust real estate activity and given the company's current view on the coronavirus. However, "this may be revised downward due to the impact of the coronavirus on Chinese demand and the knock-on impact elsewhere." The company said the precise impact of the coronavirus is unknown but it has had a negative impact on Chinese prices and spreads, and the situation could continue if inventories keep rising at mills in China, putting downward pressure on pricing.
ArcelorMittal said it expects "a significant negative impact on industrial output and steel demand during the first quarter of 2020." It went on to say, "Assuming the disruption fades soon, employment and incomes are expected to be relatively unaffected, with most of the lost output expected to be recouped during the remainder of 2020, supported by fiscal and monetary easing. However, in 2020 both GDP and steel demand growth are still likely to be weaker than what was expected prior to the outbreak."
Italy now has the highest number of coronavirus infections outside the Asia-Pacific region, with more than 7,300 confirmed cases. The number of infections is continuing to rise throughout the world, creating uncertainty in the metal scrap markets. A mass selling of stocks triggered by the increasing spread of the coronavirus combined with sharply falling oil prices has resulted in stock markets across Europe crashing on the morning of Monday, March 9, with ArcelorMittal shares losing more than 15 percent.