The COVID-19 Pandemic is Eroding Confidence in The Emerging Markets
The coronavirus outbreak is resulting in a deterioration of sentiment in the steel sector. Buyers are struggling to adapt to the challenging market conditions. The strengthening of the US dollar is exerting upward pressure on steel prices denominated in local currencies, in many emerging markets.
Business activity, in Brazil, is slowing down. Distributors are wary of holding too much inventory, citing inconsistent orders from the construction and manufacturing sectors. Meanwhile, speculation is rife that domestic steelmakers will continue to push for price increases, in April.
The outlook for the Russian market is unchanged. Russian steel producers have made a concerted effort to bring domestic prices closer to export parity. The latest movement is being driven by the sharp depreciation of the Russian national currency against the US dollar. Buying activity by service centres is limited. Traditionally, the construction season commences in mid-April. Exporters are having limited success in selling steel products to their overseas customers.
The trading climate, in the Indian market, is deteriorating. Stockists are hesitant about placing forward orders. Automotive producers have suspended work until further notice. Meanwhile, Indian steelmakers based in the north-eastern, central and eastern states, have been notified by the government to immediately stop production. Third country import offers are, currently, unattractive to Indian buyers.
Ukrainian steelmakers are faced with a dilemma of whether to ride out the current decline in end-user consumption, or downgrade planned production targets. Downstream demand is sluggish as buyers adopt a cautious attitude.
Unfavourable business conditions persist, in Turkey. Demand is low and forecast to deteriorate further. Producers, operating electric arc furnaces, are considering stopping production, citing volatile scrap costs and the weakening of the Turkish lira against the US dollar. The mills’ selling prices are being reviewed on a daily basis. Meanwhile, leading automotive manufacturers have decided to temporarily suspend operations.
Sentiment is declining in the United Arab Emirates. Local stockists contend that the re-emergence of volatile foreign quotations has made it too risky to complete any deals at this stage. MEPS notes reluctance on the part of end-users to commit to forward orders. Meanwhile, Chinese suppliers have resumed selling material to customers in the GCC region.
Trade is muted, in South Africa. MEPS detects little sign of recovery in the short term. Several distributors are holding off purchasing until May to see how demand develops. New enquiries for construction-related steel products is weak.
Mexican flat product service centres prefer to wait and assess the market direction because they find current mill offers unworkable. They are concerned that domestic suppliers will press for higher quotations, in April. The strength of the US dollar against the Mexican peso has only exacerbated the situation.