February 6, 2020 / 5:01 AM / 13 days ago

China steel group calls for industry stability amid coronavirus

BEIJING (Reuters) - The China Iron and Steel Association (CISA) on Thursday asked steel firms to maintain stability amid fluctuations in steel prices caused by slumping demand as the coronavirus outbreak disrupts transport and industrial activity.

FILE PHOTO: Cranes are seen above piles of steel pipes to be exported at a port in Lianyungang, Jiangsu province, China, December 1, 2015. REUTERS/China Daily/File Photo

The CISA said that companies facing the new situation of the virus outbreak should rationally analyze and accurately judge the market trends, according to a statement.

The industry association appealed to mills to “reasonably adjust their production rhythms” on downstream demand dynamics and avoid overstock and ensure ample cash flow.

“(Mills should) jointly safeguard hard-won ‘de-capacity’ results and lay a solid foundation for the industry’s profitability and normal operation throughout the year,” it said.

The coronavirus epidemic, a flu-like virus which was first identified in China’s Hubei province, has killed 563 so far and confirmed cases have climbed to 28,018.

The transport controls in place to control the virus’s spread has caused logistics backlogs at steel mills. Slowing industrial activity has added to sluggish downstream steel demand from the suspension of construction activities during China’s Lunar New Year holiday at the end of January.

Prices for steel and raw materials have plunged as a result.

The Platts iron ore index (IODEX) for 62% iron content, the industry benchmark, plunged on Monday, the first day after the end of the Lunar New Year holidays, to $79.80 a tonne, the lowest since Nov. 11. It rebounded to $80.55 by Wednesday

Benchmark iron ore futures on the Dalian Commodity Exchange have dropped 14% since Jan. 20. Construction rebar steel on the Shanghai Futures Exchange has declined more than 9% since then.

The CISA said is “not optimistic” about the production and operations in China’s steel sector in the first quarter, but demand is expected to rise with the implementation of government stimulus in the second quarter.

Reporting by Min Zhang and Shivani Singh; Editing by Christian Schmollinger

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