Shanghai steel tumbles as coronavirus crisis clouds demand

[BEIJING] Hot-rolled coil (HRC) futures in China plunged on Wednesday, hitting their lowest in 3.5 months, as the novel coronavirus pandemic dents demand amid an already slowing global economy.

"Downstream demand for HRC, mainly from manufacturing sectors such as autos and home appliances, are not good," said Zhao Yu, an analyst with Huatai Futures, adding that the spreading virus outside China since late March also affected HRC exports.

Major automakers halted production at plants in North America as corporations grapple with growing signs of coronavirus damage.

Exports of China's steel products slumped 27 per cent in the Jan-Feb period.

Tang Chuanlin, analyst from CITIC Securities, noted that some steelmakers' plans to launch more production capacity this year could increase HRC supply and put further pressure on prices.

The most active May contract of hot-rolled coil on the Shanghai Futures Exchange dropped as much as 2.5 per cent to 3,181 yuan (S$639.28) per tonne in early trade, the lowest since Nov 14. It was down 1.5 per cent at 3,211 yuan per tonne, as of 0330 GMT.

Shanghai construction rebar, for May delivery, extended losses into a third session, down 1 per cent at 3,370 yuan per tonne.

Stainless steel futures, for June delivery, edged up 0.3 per cent to 12,015 yuan per tonne.

FUNDAMENTALS

- Benchmark iron ore futures on the Dalian Commodity Exchange fell 1.4 per cent to 641 yuan per tonne in morning trade on demand concerns, despite Brazil's Vale statement that the resumption of its lost production capacity could be postponed due to the coronavirus.

- Dalian coking coal dropped 0.9 per cent to 1,244 yuan per tonne and Dalian Coke fell 0.7 per cent to 1,755 yuan per tonne.

- China's factory activity improved in March after plunging a month earlier, a private survey showed on Wednesday, but the bare minimal growth highlighted the intense pressure facing businesses as the global coronavirus pandemic shuts down many countries.

- More than 799,800 people have been infected by the coronavirus across the world and 38,854 have died.

REUTERS