China steel inventories pile up as coronavirus shakes demand

China’s steel product inventories have continued to build sharply this month, traders and analysts say, as government efforts to support the economy amid the coronavirus outbreak have so far failed to revive steel demand.

Inventories of five main steel products – including construction steel rebar and hot-rolled coil used in cars and home appliances – have surged since late January when the number of virus infections spiked dramatically in China, paralysing transport links and dampening downstream demand.

Steel stocks held by Chinese traders hit 23.74 million tonnes as of Feb. 27, the highest level since at least May 2006, data compiled by consultancy Mysteel showed.

A Beijing-based trader who buys steel products from large mills in top steelmaking province Hebei and has storage capacity at 2 million tonnes said his stocks were piling up.

“Mills keep sending their finished products to us, but we haven’t any notice on when can ship them out to downstream users,” said the trader, who declined to be identified.

The property sector, which accounts for about 40% of China’s steel consumption, is stagnant, while other steel-consuming industries are likely to be operating far below full capacity, ANZ said in a note.

Some steel mills in China have cut production or decided to carry out maintenance in response to the slack demand.

“If there is no rebound in industrial activity by the end of the quarter, we suspect steel production … will be hit,” the bank said.