CISA: Construction activity in China to drop 20% in Q1 due to coronavirus

Thursday, 13 February 2020 15:06:34 (GMT+3)   |   Shanghai

He Wenbo, secretary of the Communist Party Committee of the China Iron and Steel Association (CISA), has stated that the coronavirus will negatively affect steel demand, including demand for construction steel, manufacturing steel and steel exports. In China, demand for construction steel accounts for around 60 percent of overall steel demand. In the first quarter of this year, due to the coronavirus, construction activities will decline by 20 percent year on year, Mr. He stated. If the coronavirus eases by March, demand for construction steel will see some increased support as construction activities will speed up during the warmer weather. However, if the coronavirus continues into March and April, there will be a further postponement of construction activities, which will result in a year-on-year decline in demand for construction steel for the whole year.

Though the Chinese manufacturing industry will also be negatively affected, sufficient capacity will provide support for steel demand as manufacturing enterprises will increase their capacity utilization rates to make up for lost production. Accordingly, Mr. He said he foresees that China’s industrial products output in 2020 is unlikely to be lower than in 2019.

As for the export sector, most steel enterprises have indicated that they completed export orders for March ahead of the Chinese New Year holiday, while there are uncertainties about whether the goods in question will be shipped on time. Meanwhile, some countries and regions are concerned about the coronavirus spreading, which will negatively affect China’s steel exports. Mr. He said that decreasing steel prices will likely result in clients’ cancellation of orders, which will exert a negative impact on steel exports in the second and third quarters of the year.

He said that, currently, steel production in China has remained stable, while inventory levels have indicated continuous rises due to the holiday extension, reduced demand for steel, traders’ wait-and-see stance, and the disruption of transportation. Accordingly, he said, steel prices are under downward pressure in the first quarter.

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