China: Baowu Expects Q1 Steel Output to be 5% Below Target

China's top steel producer - China Baowu Steel Group (Baowu) estimated its steel production and sales to be down around 1 MnT on year for February, which will be 8% below its targets for February or 5% off its Q1 expectation, because of the novel coronavirus disease (COVID-19), Zhang Jingang, Baowu's vice general manager shared at a recent industrial meeting.

Baowu, a merger entity Shanghai Baowu Steel Group and Wuhan Iron & Steel Group in 2016, expected its Q1 profit to decline Yuan 2-3 billion ($285.7-428.6 million), he said.

"Most of steel enterprises under Baowu's wing have been producing as per normal now other than Xiangyang Heavy Equipment Material Co that that has yet been allowed to resume operations by the local government," he attended the working meeting of the China Iron & Steel Industry Association on February 22 and shared at the press conference.

Xiangyang Heavy Equipment Material Co is located in Central China's Hubei province, the key battlefield for COVID-19.

Baowu's four major steelmaking bases, including Baoshan in Shanghai, Meishan in East China's Jiangsu, Qingshan in Wuhan of Hubei and Zhanjiang in South China's Guangdong province, are all running at nearly of their respective full capacities, Zhang confirmed, explaining that the Wuhan site has been operating despite located at the epicenter of COVID-19, as it has been able to satisfy over 50% of oxygen demand for local hospitals as well as to support the local consumption for coal gas, water and electricity.

At the same time, Baowu, similar to the other Chinese steel mills, is with mounting steel stocks amid normal steel production, as steel demand has been dampened by the Chinese New Year holiday and the epidemic when downstream industries have not been able to resume operations after the CNY holiday, and deliveries of finished steel have been slow because of the epidemic, he said.

Domestic steel orders for March has been down 5% for Baowu Group because of the postponed resumption of the downstream industries, Zhang shared.

"Our steel warehouses are close to its full stocking capacity, especially those in Hubei," he said, disclosing that finished steel inventories at its Wuhan works, for example, were over 400,000 MT, or 230,000 MT more than the end of 2019, or at the brim of its full stocking capacity, and the tonnage at the Echeng Steel, also in Hubei, was at about 76,000 MT, or more than doubling the normal volume.

Other than the core sites, Baowu's Xinjiang Bayi Iron & Steel Co in Northwest China's Xinjiang is running at around 70% of the capacity, the Guangdong Shaoguan Iron & Steel Co in Guangdong at 85%, Baosteel Desheng Stainless Steel Co in Southeast China's Fujian around 80% and Echeng Steel Co in Hubei at around 90%, according to Zhang.

All the steel plants in operation are also facing consistent challenges in transportation, dwindling stocks of steelmaking raw materials such as scrap and other supplementary supplies such as thermal coal and solvents and the difficulty of replenishment, he admitted.