The beginning of 2020 is very tough, new Coronavirus raged throughout China,and even spread globally. This virus has a great impact on all aspects, especially the real economy and the service industry, since people can’t get together, otherwise there is infection possibility. Hereby, we would like to analyze effects on steel structure industry, which we understand better,and hopefully this could support customers to understand industry information well in China market,or our peers to take measurements to avoid bad situation.

☆ “COVID19” effects on steel structure industry

● Material supply: Basically stable at present,a reduction in production at a later stage

According to China Metallurgical News Agency investigation, as of February 10, the epidemic period can be divided into two phases.

The first stage is from January 23 to February 1, most of the long-process steel production enterprises (except iron and steel enterprises in Hubei province,since they are most effected) were under stable production. According to the statistics of China Iron and Steel Industry Association, in end of January,2020, the whole country produced the following quantities:

Crude steel: 29.387, an increase of 0.56% MoM;

Pig iron: 24.575 million tons, an increase of 3.71% MoM;

Steel: 36.748 million tons, an increase of 0.37% MoM.

The second phase is from February 1st to 10th, the production of some iron and steel enterprises was affected by “COVID19” and there was a reduction in production. According to the statistics of China Iron and Steel Industry Association, in early February, the whole country produced the following quantities:

Crude steel: 26.567 million tons, a decrease of 2.18% MoM and an increase of 8.67% YoY growth;

Pig iron: 21.515 million tons, a decrease of 0.85% MoM and an increase of 5.62% YoY growth;

Steel: 33.399 million tons, a decrease of 7.64% MoM and an increase of 5.65% YoY growth.

Compared with January, the national crude steel daily output level fell by 4.11% in early February, the pig iron daily output level fell by 3.46%, and the steel daily output level fell by 6.97%.

From the current situation, about 30% of steel material enterprises were affected by “COVID19” , and the pressure for steel companies to cut production and stop production has increased in the later period. Especially for short-flow production lines, until 10th, February, the operating rate of more than 70 electric furnace steel plants were less than 5%.

● Steel Structure Enterprises: Resumption of work was delayed, demand for steel products is lagging. The market shows a trend of oversupply in the short term

Depending on the severity of different new Coronavirus impacts, all steel products companies have delayed resumption of work. At the same time, resumption of work needs to submit an application, governments have strict requirement on resumption and the enterprise must also make sure the employees' anti-epidemic materials. Considering shortage of anti-epidemic materials in China,it does effect on resumption for all the companies. Except these, once personnel move, they must be quarantined for 14 days when they move to another place, this also leads to a shortage of workers.

From the perspective of the resumption of business, it is expected that the restructuring rate of the entire steel structure producer and the construction industry will be less than 30% by the end of February, and other manufacturing industries will be less than 70%. Delaying the resumption of work will delay the release of market demand for steel. It is expected that demand for construction steel will not return to normal levels until the end of March at least.

● Steel Structure Enterprises: High inventory pressure & orders reduction

Because of late work resumption and national logistics restrictions,there is high material stock for steel industry. According to the statistics of the Steel Association, in early February, data in details are as follows:

The steel inventory of key statistical enterprises was 18.5147 million tons, an MoM increase of 54.472 million tons, around 41.69% increased;

Comparing to early of this year,an increase of 89.822 million tons, around 94.23%  increased;

Among them, the social inventories of the five major types of steel in 20 cities were 14.71 million tons, an increase of 6.52 million tons from January and around 79.6% increased; An increase of 7.79 million tons from December last year, around 115.7% increased.

In different regions, the Northeast region increased by 219.1%, the North China region increased by 102.7%, and the Southwest region increased by 100.2%.

Meanwhile,due to delays in the resumption of various industries, orders have also been reduced significantly, except for some emergency hospital construction.

● Impact on export of steel products

→ Orders before CNY and need to be delivered after CNY, they were delayed a lot,even the delivery date cannot be determined;

→ The frequency of vessels was decreased, and freight rates were rising,compared to previous years. After all, during this season,many routes in previous years should be a lower tariff;

→ Claims from foreign customers for delays in project progress.

☆ Countermeasures and suggestions to reduce the impact of “COVID19”

● Looking at the whole year, the impact is not significant

When the epidemic is resolved, both upstream and downstream will resume work and production, and the general tone of China's economic stability and progress has not changed. In the later period, corresponding economic stimulus policies will be introduced or active fiscal policies and stable monetary policies will be adopted. Promote the construction and investment of infrastructure (especially medical infrastructure, rural infrastructure and public services). The demand for steel will be released in a concentrated manner, which will bring steel production and operation on track. Throughout the year, the impact of the epidemic on the steel industry was limited, and the industry showed short-term fluctuations and long-term stability.

● Try and create other operating models

During the market downturn, steel companies and traders can open online orders and service models mostly. Taking “Taobao” as an example,SARS impact on the entire industry chain and the economy and society in 2003.Online shopping got a success at that time and made “Taobao” developed quickly. Remember that crisis is also an opportunity.

● Centralized maintenance of equipment when production is reduced

Steel structure enterprises can make full use of this opportunity to overhaul and maintain equipment. In this way, it can improve emergency response capabilities, and deal with some hidden safety hazards in time to prepare for safe and stable production after the market recovery.

● Make overall preparations for resumption of work

Once the epidemic is over, traffic restrictions are lifted, the steel downstream industry resumes work, and market demand resumes. There is possibility that logistics and transportation may be grabbed. Steel enterprises need to strengthen communication and coordination with suppliers and customers in a timely manner, ensure order progress in all aspects.Also all the enterprises need to respond to the call of the Ministry of Industry and Information Technology, play an exemplary role for large enterprises, and promote the resumption of production in batches.

● Attach importance to the development of intelligent manufacturing, and avoid the impact of immunity and labor shortage on production in future

For example,through remote operation and maintenance, big data, artificial intelligence and other technical means, Baosteel enterprise has turned the cold-rolled & hot-dip galvanized intelligent workshop in Shanghai Baoshan Base into a "black light factory", which can operate 24 hours without the need for multiple people on duty. The two 200-meter-long production lines basically implement machine substitution. Each production line has only 2 to 3 workers mobile inspection. If the production line encounters technical problems, it can be solved by engineers at home through mobile phones. The software on the mobile phone can not only clearly see the Shanghai base, but even the Baosteel Zhanjiang base, which is 3,000 kilometers away, so as to achieve stable production under "no-face production" and "smart logistics (unmanned crane)".

● About export of steel products

→ First of all, do a good job to comfort customers,in order to avoid customers worry about being infected after purchase, because of new Coronavirus problem.

→ For customers who have urgent orders for shipment, it’s better to update the latest resumption status in a timely manner. Customers will inevitably put forward to compensation issues. You can negotiate with customers and in a way that is acceptable to both parties, suppliers must not just take the cause of the epidemic and refuse to accept responsibility.

→ Freight issues:In some areas logistics is prohibited, so you may consider choosing to cooperate with your peers and do a good job of communicating production and delivery in areas with mild epidemics.

What about Yumisteel?

Yes,we already work normally now,please don’t worry to make inquiry. As a responsible steel structure products supplier, we will continue to do a good job of prevention and control, and ensure production safety,to deliver goods timely to customers. To know our product range, please click here.Thank you.

Go,China!

Wuhan,a hero city,stay brave and be strong!