Final Thoughts
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Final Thoughts
Written by Tim Triplett
January 29, 2020
John Packard is traveling…
The World Health Organization declared the coronavirus outbreak in China a global public health emergency earlier today. Six patients in the United States have been confirmed as infected by the potentially deadly virus…so far. Makes those seasonal sniffles you’re feeling even more disconcerting, doesn’t it? And what does it mean for the health of the steel market in the U.S.
Calamities that occur in China, viral or otherwise, have a way of spreading to other parts of the world. This one has the potential to disrupt Chinese steel production and consumption in unpredictable ways. In one scenario, China may find itself with a glut of steel that ends up on the export market, with the predictable effect on global steel prices.
In his report in this issue of Steel Market Update (CRU: Impact of the Wuhan Coronavirus on the Steel Industry), CRU Analyst James Campbell notes that the Chinese have taken extraordinary measures to reduce human interactions and slow the spread of the virus. The Chinese New Year holiday has been extended, public transportation has been restricted, and manufacturers across the giant nation are suspending operations and ordering workers to stay home. More than 60 million people in 13 cities in China have been fully or partially locked down since the virus outbreak and are likely to remain that way until at least Feb. 9.
Steel demand in China is normally weak this time of year, but production continues. Economists and analysts look back to the SARS outbreak in 2002-2003 for clues on how this latest pandemic may play out. Industrial production growth fell by 0.8 percent and auto production by 5 percent back then. In the current conditions, Campbell estimates that every day of lost activity across China could cut domestic steel demand by 2.5-3.0 million tons.
In other scenarios, in which exports are limited by transportation restrictions, there is a potential short-term upside to global steel prices. Much depends on the unknown–how long before the virus is contained.
During a press briefing earlier today, SMA President Phil Bell was asked to speculate on the potential impact of the coronavirus on the U.S. industry. One potentially positive outcome from this very negative situation is fewer exports of Chinese-made steel to the U.S., he said. “There is enough capacity domestically to meet customer requirements in the U.S. across all product lines. The overall impact of the virus remains to be seen, but the U.S. is poised to take up the slack if Chinese imports go down.”
In the past two weeks, the number of people infected with the coronavirus in China reached an estimated 6,000, not counting more than 9,000 suspected cases. As of Wednesday, the death toll from the flu-like illness was 132.
SMA member Chuck Schmitt, president of SSAB Americas, put the crisis in perspective. “We don’t know what the effect will be [on steel]. Right now, our thoughts and prayers go out to all those affected.”
Hopefully, long before August, the coronavirus will be old news. But Chinese steel production and it’s effect on global steel prices will be a topic front and center at the 2020 SMU Steel Summit Conference. For more information about the conference, Aug. 24-26 in Atlanta, go to www.SteelMarketUpdate.com/Events/Steel-Summit
Registration is also open for the March 31-April 1 Steel 101: Introduction to Steel Making & Market Fundamentals Workshop in Merrillville, Ind., to include a tour of the NLMK Indiana mill. You can learn more and register online at www.SteelMarketUpdate.com/Events/Steel101
It’s not too late to renew or upgrade your SMU membership prior to the rate change that takes effect Feb. 1. Speak with Paige Mayhair at 724-720-1012 or by email: Paige@SteelMarketUpdate.com
As always, your business is truly appreciated by all of us here at Steel Market Update.
Tim Triplett, Executive Editor
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Tim Triplett
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Sheet prices didn’t roar back after Labor Day. But steel market news sure came out of the gate strong (or maybe chaotically is the better way to put it). First, the nearly $15-billion proposed sale of U.S. Steel to Nippon Steel exploded into the news. And when I say exploded, I mean that all sides seem to be escalating things now.
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Welcome back from Labor Day, from Steel Summit, and from whatever fun you might have had over the long weekend. Personally, I enjoyed camping with friends and family near Starved Rock. No one starved, there were no major injuries, and we enjoyed the many splendors of Mystical Fire. (Speaking of which, does that have industrial uses? But I digress.)
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I want to say a huge ‘thank you’ from all of us at SMU to all of you (more than 1,500!) who attended Steel Summit this year. We appreciate you taking time out of busy schedules to join us – whether that was up on stage, submitting thoughtful questions, or catching up over a drink and bite to eat. Also, a bit shoutout to everyone at SMU and at CRU who made this event possible. It’s no understatement to say that we have a fantastic team.
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Day one and two of SMU's Steel Summit 2024 are officially in the books. We covered a lot of ground, and the agenda sure did deliver.
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The big show is just about here. SMU Steel Summit will be getting underway on Monday. Where does the networking begin? I’d say at the airport. So don’t forget your business cards. And it can't hurt to wear a company golf shirt.