Having first hit Asia during early 2020, the Covid-19 viral outbreak is now having an even bigger impact on European countries and the US. Widespread lockdown measures have been put in place on people and industry, and economic activity has slowed markedly.
For now, stainless steel markets in Europe and the US are yet to show many symptoms of such a slowdown. Prices are relatively stable compared to month-ago levels but will almost certainly fall over the coming months.
They have begun to retreat sharply in China in recent weeks, and this after the country appears to have passed through the worst of the viral outbreak. Some indicators of market activity have rebounded strongly but perhaps not the ones that matter for stainless steel markets. As we highlight in our Asia analysis this month, consumption appears to have dropped faster than production. Stocks have grown and, with export markets collapsing, are likely to remain high. Production cuts must be a solution if margins are to rebound in China but this is often a difficult decision to take for producers there.
Elsewhere, producers in Europe are already cutting production. We estimate heavy falls during the second quarter of some 20% from year-ago levels. Similar measures are likely eventually in the USA. Producers in both these regions should be in a stronger position than their Chinese counterparts, however. Margins have been sustained through tighter cost-control and production discipline. Trade action has also helped. Recently-announced duties on more imports of Chinese-origin material heading for Europe (as well as material originating from Indonesia) will further strengthen the bargaining position of European producers once activity returns to some sort of normality.
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