Steel stocks are growing due to the outbreak of coronavirus in Hebei, China

Steel mills in Hebei province in northern China are forced to look for more storage space as transportation restrictions imposed to prevent the spread of the renewable coronavirus prevent them from shipping products to customers.

Hebei, which accounts for a quarter of China’s steelmaking capacity, has so far blocked three cities – its capitals Shijiazhuang, Xingtai and Langfang – as local infections soared earlier in the year. On January 12, 90 new cases of infection were registered.

Hot rolled coil and sheet inventories in the largest steel cities of Tangshan, Handan and Shijiazhuang rose 5.6% to 451,500 tonnes on January 8, the highest since late October, according to consultancy Mysteel.

Trucks from the province, which usually deliver steel products to other parts of the country, can hardly move due to local restrictions, while entry into other regions is strictly controlled.

“Vehicles with Shijiazhuang license plates are prohibited from entering the highway,” a source familiar with the situation said, adding that truck drivers from elsewhere in Hebei also face strict entry requirements or are under 14-day quarantine.

A seller from Jingye Steel Group, a major construction fittings manufacturer based in Shijiazhuang, said the company has been unable to ship any products since January 6 and since then inventories have risen 300%.

“We are looking for warehouses around the plant,” he said on condition of anonymity. “The pressure is even greater than last year, because this time we are the epicenter (of the virus).”

The Jinxi Group in Tangshan also said it needs to make room for rising shares.

However, since steel consumption typically declines in the winter as construction activity slows, analysts expect this impact to be manageable in the short term.

“Manufacturing in the factories is normal as the raw materials are mainly delivered by rail, which has not yet been touched,” said Liu Xinwei, Principal Investigator for Sublime China Information.

“However, if inventories continue to rise, mills may cut production slightly to ease pressure,” added Liu.

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