Chinese Lockdown Restrictions May Disrupt Steel Supply Chain

The shipment of metals and iron ore from the Chinese province of Hebei has been restricted due to a new COVID-19 outbreak in the major steelmaker region of the country, causing serious setbacks and imminent lower demand in China’s steel industry.

The shipment of metals and iron ore from the Chinese province of Hebei has been restricted due to a new COVID-19 outbreak in the major steelmaker region of the country, causing serious setbacks and imminent lower demand in China’s steel industry.

The China Iron & Steel Association (CISA), an organization that represents the largest steel and iron ore suppliers in the industry, said the lockdowns that had been imposed on Hebei had limited the function of steel mills within the region.

“Companies are facing restrictions in logistics and transport, trades have been muted, prices of raw materials and steel have slid, which is causing the market’s value to decline,” the group said in a statement.

This restriction has seriously hampered the transportation of the steels. Officials barricaded many roads in Hebei and left rail as the only route to deliver the materials, causing completed steel to pile up at major mills of the region.

“Partial lockdowns have restricted the transportation of goods, resulting in a sharper build in inventories held by local steel mills rather than at stockists in the first half of January,” Navigate Commodities’ co-founder and Managing Director Atilla Widnell said in his emailed statement to CNBC on Monday.

He continued: “We have heard anecdotal evidence that some stockists and traders are reluctant to tie up cash flow in-case a ‘soft lockdown’ is prolonged or intensified.”

CISA also advised the suppliers to have lower production of steel and iron ore to prevent surplus of metal as they brace lower demand from their customers.

“Steelmakers should appropriately adjust production schedules based on orders, finances, ability to transport materials,” said the group, adding that companies in the steel industry must “avoid malignant competition, manage traders, and strictly not sell at low prices and disrupt the market.”


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