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China steel body seeks help with transport as virus leaves mills stranded

China’s steel industry body has asked the government for help in overcoming transport disruptions caused by curbs aimed at stopping the spread of coronavirus, as steelmakers struggle to bring in raw materials for their plants or ship out products.

The China Iron and Steel Association (CISA) appealed to the Ministry of Transport to “take forceful measures” to ensure mills had adequate transportation to sustain their operations, according to a document seen by Reuters on Thursday.

The document, dated Feb. 12, said “extreme measures” taken to fight the epidemic, such as lockdowns on cities and roads in some regions, were greatly impacting mills’ access to raw materials and their outbound deliveries of steel products.

A CISA official confirmed the association had sent such a document to the transport ministry.

Some mills relying on road transport are facing shortages of raw material such as coking coal and limestone due to a lack of truck drivers, as some were unable to return to work on time due to the epidemic, the association said.

A source from a Shandong-based state-owned steel mill, who requested anonymity as he is not authorised to speak to the media, said the plant has its own trucks for transport, but drivers from other cities are expected to have a 14-day quarantine before returning to work.

The virus, first discovered in December in Wuhan, the capital of Hubei province, has killed more than 1,300 people.

Wuhan Iron and Steel Co Ltd, a unit of top steelmaker China Baowu Steel Group located in the virus epicentre, only has enough raw material inventory to sustain production for about five days, according to the CISA.

Coking coal inventories at the headquarter of Liaoning’s Angang Steel Co Ltd are sustainable for only ten days, it added.

The association also pointed out there had been a sharp rise in finished steel product stocks at mills after the Lunar New Year holiday.

Stocks at Chinese steel mills rose by 17.3% from a week earlier to 11.5 million tonnes as of Feb. 13, data compiled by consultancy Mysteel showed.

While stocks are piling up, some companies are encountering cash flow problems, posing a threat to their production and operations, the association said.

The CISA called for steelmakers last week to adjust production to avoid overstock and ensure ample cash flow amid the coronavirus outbreak.

Steel traders, who typically replenish stock after the holiday period, are holding back purchases this year due to logistical constraints as well as an uncertain demand outlook.

“The (transport) situation might only recover in late February,” said the source from the Shandong mill.
Source: Reuters (Reporting by Min Zhang and Tom Daly; Editing by Tom Hogue, Simon Cameron-Moore and Jan Harvey)

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