Message from Secretary General_March 2020
Posted on 23 March 2020
Greetings from SEAISI!
A month has passed since I wrote the February newsletter and the outbreak has become a pandemic, as declared by the World Health Organisation.
From a focus mainly in China, now many countries are taking drastic steps to contain the outbreak. The number of COVID-19 infections outside of China has exceeded China’s infections, pointing to the grave situation of the pandemic worldwide.
In Europe and the US, borders are being closed. Travel is being restricted. Businesses are ordered to shut. Schools are being closed. Events and activities have been cancelled or postponed. All these were imposed to avoid large scale gatherings.
Impact on the Iron & Steel Industry
As China recovers from the situation, lockdown measures are being wound down, easing travel and business restrictions. Freeways, toll-ways, factories and construction sites are starting to re-open.
Demand Side Impact
The construction sector was generally at a halt, while the automotive industry has been slowed down by the outbreak, especially in Wuhan and Hubei province. As more businesses resumed operations, deliveries to construction sites and factories have rebounded, although still much below the previous levels.
Various provincial governments have announced new or expanded development programmes to stimulate the economy, especially the construction sector. Coordinated fiscal and monetary support is being provided by the government to the various industries and enterprises.
While efforts are ongoing to bring up the economy, demand has been sluggish to date as the industries struggle to recover.
In the meantime, the same scene is starting to re-play across Europe, US and the Middle East.
Supply Side Impact
On 16 March 2020, the National Bureau of Statistics, China reported severe economic slump in China during the first 2 months of 2020:
· Total value add of industrial production dropped 13.5%:
‐ State owned enterprises : - 7.9%
‐ Foreign owned : -14.2%
‐ HK, Macao, Taiwan owned : -21.4%
‐ Private enterprises : -20.4%
· By sector:
‐ Mining : - 6.5%
‐ Manufacturing : -15.7%
· By products:
‐ Cast iron production : + 3.1%
‐ Crude steel production : + 3.1%
· 85.6% of large and medium-sized manufacturing companies resumed businesses at the end of February 25th
· The total value of imports and exports was ¥4,123.8 billion, a year-on-year decrease of 9.6%
‐ Total value of exports reached ¥2,040.6 billion, down by 15.9 %
‐ Total value of imports reached ¥2,083.2 billion, down by 2.4%
In short, while industrial production, export and import fell drastically, production of steel in China continued to grow at 3.1%.
The key concerns about China Steel Industry
· The major concern is the high steel inventories in China. Where will these go? The steel industry is running out of space to store these inventory
Iron ore prices are “holding out” at about US$90/MT (after weakening in February 2020) given the supply disruptions from Brazil and Australia
· Exports have fallen because of difficulty to transport materials during the lockdown measures in China
· With delayed construction projects and shut businesses, demand has fallen. Steel prices have also fallen in China
Traditionally, when Chinese demand weakens, steel producers will export more, with the biggest impact on the neighbouring region, such as South Korea, Taiwan and ASEAN. Will this happen anytime soon considering the regional markets are also reeling from the effects of the outbreak?
The situation is very fluid with the global spread of the outbreak. The stark numbers from China industry statistics are expected to be similarly repeated in the severely affected countries around the world, eventually slowing world economic growth.
We will continue to keep you posted as the situation becomes clearer.
2020 SEAISI Conference & Exhibition
It is my regret to announce that, this highly anticipated event, the 2020 SEAISI Conference & Exhibition, has been postponed to a later date. This is a necessary decision given the threat to the health and safety of our stakeholders.
Interestingly, SEAISI has received many papers for the first 2 days of the conference and we anticipate high levels of participation from speakers for the entire event. Interests from our exhibitors have remained high. We have also lined up a few high-profile industry leaders as keynote speakers. Also, MISIF, our event co-host, has arranged for plant tours to steel companies, an automotive plant and an automated building factory.
We will update on the new schedule as soon as we firm up the details.
Stay Healthy & Be Safe
As the outbreak continues to threaten everyone’s lives, please practice hygiene and vigilance. Avoid large gatherings. Stay safe.
YEOH WEE JIN
Source : SEAISI