Southeast China steel market hit as virus cases spike

Business activity in Southeast China's coastal province of Fujian is being seriously disrupted as local authorities rush to respond to the recent jump in new COVID-19 cases. Sources in the province say the local steel market is in a near state of suspension as highway traffic checks are hampering steel deliveries and activities among steel consumers such as building contractors are slowed or halted.

The fresh outbreak of the virus first emerged in Putian, a major city of 2 million located about 75 kms south of the provincial capital of Fuzhou on September 10. As of September 15, Fujian Provincial Health Commission was reporting that 200 local new cases were found in the province, with 129 in Putian, 53 in nearby Xiamen and 18 in the port city of Quanzhou. Also, a recent traveller from Fuzhou quarantining in Ruili in Southwest China's Yunnan province, also tested positive.

China's steel market has only just recovered from the turmoil created by the previous COVID-19 outbreak over July-August, mainly in East China's Jiangsu province, so the latest spike in Fujian is bringing renewed uncertainty to the market, sources said.

"Compared with the rise in cases in Jiangsu, the new outbreak in Fujian has had a more immediate impact on the local steel market as there are few traders' warehouses in the province and local mills send products directly from their own yards to users," a steel analyst based in the province explained. "The longer distances for transportation are making steel deliveries more susceptible to measures local authorities are introducing to curtail the COVID-19 spread," he noted.

In terms of traffic control, in Putian, the epicenter of the new virus outbreak, local authorities have placed round-the-clock controls on the entrances and exits of 20 highways and nine roads connecting the city to other cities and provinces, for example.

Major steel producers in the province, such as Fujian Sangang Group and Sanbao Group, have stopped delivering steel products to customers and distribution centers in the affected cities or areas, according to notices steelmakers issued on September 12. Some mills have even stopped accepting new orders from these regions.

Work on construction sites in and near Putian has been halted and the roads are closed, an official with steel trading agency based in the city stated. "The steel market here is almost at a standstill due to the fact that most products are delivered from other regions," he told Mysteel Global.

How quickly this new outbreak in Fujian will be brought under control and whether its impact will extend to other regions remains unclear. For now, however, "the influence has been confined only to Fujian, and has not disrupted major steel-consuming provinces nearby such as Guangdong (South China) and Zhejiang (East China)," the analyst said.

Fujian province produced 24.7 million tonnes of crude steel in 2020, or less than 3% of China's total.

Written by Olivia Zhang, zhangwd@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.