COVID-19 is the highly-contagious strain of the novel Corona virus that has caused major upheaval in the current world order, and has given wind to one of the most economically dire situations that most countries have had to deal with. So far, we have seen stock markets crash, as well as pick up – and it is still too early to tell how deep and long lasting the impacts of this pandemic will be on both the Canadian economy as well as the world’s economy as a whole.
In the start of 2020, before the effects of worldwide lockdowns began to take effect, the percentage of the overall manufacturing of steel in the world increased (with China contributing to the major rise in production, while there was a decrease in steel production across many countries including European heavyweights).
COVID-19 is the highly-contagious strain of the novel Corona virus that has caused major upheaval in the current world order, and has given wind to one of the most economically dire situations that most countries have had to deal with. So far, we have seen stock markets crash, as well as pick up – and it is still too early to tell how deep and long lasting the impacts of this pandemic will be on both the Canadian economy as well as the world’s economy as a whole.
In the start of 2020, before the effects of worldwide lockdowns began to take effect, the percentage of the overall manufacturing of steel in the world increased (with China contributing to the major rise in production, while there was a decrease in steel production across many countries including European heavyweights).
The other fact of the matter is that there is currently no end in sight in terms of the pandemic, and therefore the steel industry must brace for a longer semi-hiatus. Certain optimistic pointers emerge at this junction. China has managed to contain the virus by strict self-isolation and social distancing measures, and many of the industries that are big players in the Chinese economy including steel manufacturing, shipbuilding and automotive industries have bounced back to very high production levels since the lifting of the lockdown.
Planning the Future
This bounce back that we have seen in countries that have managed to contain the virus is largely encouraging. However, until we are past this curve, a few of the things that steel companies need to focus on to power through this difficult time is reducing costs, increasing margins and improving utilization will need to be priorities in order to maintain trade flow. Projects that are started need to be carefully examined to prevent spending large capital upfront.
How to deal with the threat of COVID-19
Apart from what companies are doing in order to protect their interests during this time, it is also important for Canada and each country to internally shorten the supply chain to reduce future disruptions in essential industries if there is a situation where international borders are shut and when countries that are traditionally suppliers begin to conserve their international trading.
While construction has continued to function as an industry during this pandemic after being widely recognized as an “essential service”, many other sectors that are directly related to the steel industry, like automotive manufacturing (and sales) have taken a major hit across the world. This means that there could be some universal effects due to reduced spending capital on the steel industry as a whole. In order to weather this out steel manufacturers will be forced to make certain changes to their process such as monitoring and forecasting (more so for the industries that have been labelled as non-essential industries).
All of this can also directly affect the construction industry which has seen disruptions due to breakout clusters at sites causing them to shut down (even temporarily) causing changes in scheduling, storage and ultimately cost. How well the steel industry, and almost any industry responds to it remains to be seen and will largely depend on the ability of these companies and individuals to react to the surroundings and events appropriately and a careful balancing of supply and demand during these unprecedented and challenging times.
One interesting scenario that may arise from this pandemic situation is that the low margins on the trading of steel that has plagued the steel industry through 2019 will continue through this year. This continuous decline in profit margins though the year 2020, and further into 2021 could cause mergers and acquisitions within the industry in order to protect and boost these margins.
Some of the challenges that have been presented due to COVID-19 are supply chain bottlenecks, spending reduction, manufacturing plant close downs and growing fears of a recession. This growing fear is only exasperated by the continuing lack of clarity and uncertainty that these pandemic issues have unlocked. These issues have affected and will continue to affect the steel industry and most other manufacturing related industries over the course of the next few months.
While many companies do already have in place a business continuity plan, in the past these plans were targeted more towards shorter durations of uncertainty such as when natural disasters strike, or when there is a power outage or ever cyber-attacks. These events create situations where people are able to sort thing and return to work in a few days. This pandemic has laid bare the need for more exhaustive and comprehensive continuity plans for businesses and organizations across the spectrum to take into account extensive closures and restrictions as well.
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