Feb 25, 2020
Coronavirus to Hit South Korean Steel Mills in H1 of 2020

Korea Times reported that POSCO, Hyundai Steel and other domestic steelmakers will not likely see any meaningful rebound in the first half of this year, as the spread of coronavirus will heavily dampen demand. Yuanta Securities analyst Yi Hyun-soo said "Initial outlook was that POSCO will show recoveries in the first half as the steel product spread will be improved and the US China trade dispute will also be soothed. However, the impact of the virus appears to be more serious than initial expectation, which will slow down the price, demand and the recovery of POSCO. Any attempts to boost production of steel-oriented products in China would provide a fresh impetus for South Korean steel manufacturers for noticeable recovery in the latter half of this year. The chance is very high that the Chinese government will implement any type of measures for the recovery of its economy in the near future, and industries using steel will be at the center of those measures. Though it is hard to expect the timeframe of the measures, there is a great chance of rebound in the steel industry.”

Another industry official said "Clients set up their yearly production plan. If there is an output decline in the first half of a year, they ramp up production in the second half to meet the yearly target. Though it depends on the progress of the COVID-19 situation, steelmakers expect the demand will likely show a sharp recovery in the second half."

In the wake of potential stimulus measures by the Chinese government, many expect a V-shaped earnings recovery as downstream industries in China are anticipated to come back on track.