Coronavirus to disrupt steel trade flows

Buyers of Chinese steel are diversifying their supply sources as the coronavirus outbreak threatens to disrupt shipments.

Turkish flat steel producers are getting inquiries from atypical destinations over the past week, which they attribute to apprehension about the virus interfering with deliveries. One re-roller received demand from as far as southeast Asia. Some European trading companies were drawing interest from South America, while Chinese trading firms saw a drop in regional customer demand.

Some buyers there asked about prices, but were not willing to place bids. Buyers worldwide appear to be surveying the market, seeking a clearer price direction, while opening dialogue with potential suppliers to prevent any disruptions should the situation in China escalate. “There seems to be more curiosity from buyers, but the direction of the market is still not too clear, so it’s mostly price checking without bookings,” a trading firm said.

Buyers could be simply making enquiries to European or Turkish mills just in case Chinese cargoes fail to arrive on time, a trading outlet in Asia said. “Prices are under pressure and my buyers are hesitating to make any purchases,” a third one said.

But a European trading firm said one buyer already doubled its order on concern that Asian supply would be disrupted.

A third trading outfit said it is unable to get allocation of galvanised coil to Europe from certain mills in southeast Asia, as they are working to meet their own regional demand amid China’s prolonged absence following the lunar new year and also because of the perceived risk of purchasing from the country’s mills.

That risk for the past two weeks has seen trading companies short-selling cargoes of Chinese coil, while their European counterparts also looked to clear positions. Buyers last week pulled out of negotiations as Chinese prices kept slipping.

The market at large is watching for signs of how Chinese demand could be affected by the viral outbreak as they will have an effect on pricing. But the lack of desire to book from China, and trading firms’ short positions, are filtering into decreasing fob China values, which is weighing on sentiment.

How the viral epidemic affects vessel loading and mill deliveries and logistics is also of increasing concern. Should vessels fail to load or discharge, trade and the wider macroeconomic environment could be affected. And if mills cannot maintain smooth deliveries of steel, they might amass larger stocks than anticipated. A video seen by Argus today shows a huge stock of wire rod at one mill in northern China, as well as a logistics centre full of the material.

By Lora Stoyanova