Analysis of the impact of novel coronavirus epidemic on steel market

The sudden outbreak of the coronavirus has had various impacts on economic life, causing a slight chill in the steel market in the spring of 2020. However, the steel market continues to expand throughout the year, and we can still be cautiously optimistic.

1、 The steel market has significantly cooled down this spring

Due to the need to combat the epidemic, the flow of people across the country, especially in central cities, has significantly slowed down, resulting in a corresponding decrease in logistics and economic activity. From a broader perspective, industries such as transportation, commerce and catering, tourism, and entertainment are currently facing the greatest impact. Due to the extension of the Spring Festival holiday, the peak season for construction and manufacturing in various regions has also been postponed. Under its pressure, it is expected that the national economic growth rate (GDP) in the first quarter of this year may exceed six. The overall pattern of macroeconomic slowdown will lead to a cooling of the steel market this spring, which is significantly lower than expected.

The steel market situation this spring may not be as expected, firstly due to the obstruction of personnel gathering and the extension of the Spring Festival holiday, resulting in a corresponding delay in construction and enterprise resumption. Therefore, the final consumption of steel in this spring is inevitably weakened. Secondly, the slowdown or even stagnation of passenger flow and logistics will lead to a slowdown in domestic and international trade activities of steel, including both direct and indirect exports. Finally, the sluggish consumption will inevitably lead to market suppression in the steel and finished product markets, which in turn will trigger negative impacts on the entire black commodity industry chain, resulting in market hedging behaviors. Panic will amplify these hedging behaviors, suppressing prices below reasonable levels.

It can be seen that the cooling of the steel market in spring this year is inevitable, and both the supply side and the price market will be lower than expected, with some indicators even showing an absolute decrease in quantity.

2、 The steel market remains cautiously optimistic throughout the year

Although the impact of the epidemic has made the steel market a bit cold this spring, it should also be noted that this year is the final year of building a moderately prosperous society in all respects, and the decision-making level's goal of ensuring that the annual economic growth rate operates within a reasonable range will not change.

The impact of the epidemic on economic activities is bound to stimulate decision-makers to strengthen countercyclical regulation. The economic speed loss in the first quarter will definitely be recovered in the coming quarters, especially in the second half of the year. In order to ensure the achievement of the expected annual economic growth target, it is expected that fiscal policies will be more proactive in the future, not only further reducing taxes and fees, but also the fiscal deficit rate may reach 3%. Monetary policy has also become more loose, and while continuing to implement comprehensive and structural reserve requirement ratio cuts, the probability of interest rate cuts has also increased. At the same time, it should be noted that the current national efforts to combat the epidemic are unprecedented, and the whole country attaches great importance to it. It is expected that as the weather warms up, the rampant outbreak of the coronavirus will gradually dissipate. If there are no more major accidents, the national economic growth rate will gradually increase. It is expected that the economic growth rate in the first quarter will be around 5%, or possibly lower than 5%, but the economic growth rate will gradually rebound in the coming quarters, and the annual economic growth rate can still reach 6%.

Experts have analyzed that the impact of the last SARS epidemic on China's economic growth rate was not unbearable, and the important factors determining the annual economic trend mainly came from self generated forces rather than external shocks. Before the last SARS outbreak in 2002, China's economic growth rate was 9.1%, while in the year of the SARS outbreak (2003), the economic growth rate increased to 10%. This can be referenced.

决策层强化逆周期调节，除了财政政策与货币政策双管齐下外，推动固定资产投资，尤其是加强促民生、补短板的基础设施投资，仍将是其主要“抓手”。这样，钢材消费反而会获得额外增加。此外，全国大规模抗击时疫，加强医疗、防疫、卫生等方面巨额开支，也会直接与间接产生新的钢材需求。

综上所述，今年全国钢材市场格局呈现前低后高态势，后3个季度，尤其是下半年市场形势明显好于一季度。全年总量钢材需求(含直接出口)不会减少，粗钢供需两侧总量双双突破10亿吨，增幅都在3%以上，继续增长预期不变。

信息来源：煤炭网

Editor He Yang of this website/Organizing