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Many nations witnessed an unprecedented drop in steel demand, in the second quarter of 2020, at the height of the first wave of coronavirus infections. During this time, several individual country PMI readings fell to the lowest levels ever recorded. The most severe drop was in the IHS Markit India Manufacturing PMI which fell to just 27.4 in April. However, in the third quarter, global steel demand improved, as manufacturing activity resumed, with the lifting of restrictions.
The post-lockdown recovery in steel demand has been stronger than initially anticipated, for most countries. As a result, the PMI readings for the majority of nations showed considerable improvement, during the July/September period. Many returned above 50 – indicating an expanding economy. Several individual country PMIs even surpassed pre-pandemic figures, most notably Brazil. The IHS Markit Brazil Manufacturing PMI rose to 66.7 in October – from the coronavirus-induced low point of 36.0 in April.
In China, the first country to be hit by the pandemic, the resumption in activity started towards the end of the first quarter. The country’s Caixin General Manufacturing PMI only dropped below 50 during two months of this year – February and April. The Chinese authorities’ ability to quickly supress and control the virus, coupled with the government’s stimulus measures, resulted in a relatively strong domestic economic recovery.
Steel output remains below pre-pandemic levels
Such a significant drop in global demand led steelmakers to idle capacity and cut production by an unprecedented amount, during the March/June period. However, with encouraging signs of a recovery in demand, in the third quarter, producers have gradually started to increase their production levels. Nevertheless, output in most countries remains below pre-pandemic volumes, most notably, in Europe, Japan and the US, where some of the most drastic cuts in steelmaking were recorded, in the second quarter.
MEPS estimates that finished steel production, in the EU, fell by 18.4 percent in the July/September period, year-on-year. Despite Japan’s ability to effectively control the virus, finished steel output in that country is forecast to decline to around 71.3 million tonnes in 2020 – a reduction of approximately 17 percent, compared with the previous year’s total. In the US, capacity utilisation rates have improved but remain at around 70 percent. Many steelmakers are reluctant to resume full operations, while the world still battles to control the virus. Conversely, in China, finished steel output continued to increase, year-on-year, in the first nine months of 2020. It is expected to reach an all-time high in the full twelve-month period.
Second wave to hinder recovery
The rate of economic recovery, in the final few months of the year, has been clouded by the resurgence of coronavirus cases. Several nations have reintroduced or increased containment measures, including new lockdowns. As a result, the speed of recovery is expected to slow, while these measures are in place. However, it is unlikely that steel demand will fall back to the record lows witnessed early in the year.
Businesses in the manufacturing sector are more prepared for the containment measures, this time. Most companies have adapted well to working with the Covid prevention methods and governments are encouraging employees, within the sector, to continue to attend work unless they are able to work from home. Therefore, it is unlikely that any major producers and OEMs will shut during this second wave.
The degree of setbacks to the industry are likely to be determined by the length of time it takes each country to regain control of the spread of the virus and ultimately what happens to consumer confidence and spending during that time.
- Stainless Steel exhibition,2021
Stainless Steel exhibition, China Stainless Steel exhibition,
Guangzhou Stainless Steel expo,Guangzhou
Stainless Steel exhibition, 2021 Stainless Steel expo,
China Stainless Steel expo
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