Steel mills in northern China's Hebei province are having to find more space for inventories as transportation restrictions imposed to prevent the spread of a resurgent coronavirus prevent them from sending out products to clients.
Hebei, which accounts for a quarter of China's steel capacity, has so far put three cities - its capital Shijiazhuang, Xingtai and Langfang - into lockdown since local infections leapt at the start of the year. It reported 90 new cases for Jan. 12.
Stocks of hot-rolled coil and plates in top steel city Tangshan, Handan and Shijiazhuang rose 5.6% to 451,500 tonnes as of Jan. 8 from week earlier, the highest since the end of October, according to data from consultancy Mysteel.
Trucks from the province that normally take steel products to other parts of the country can barely move due to the local lockdowns, while other regions are strictly controlling entry.
"Vehicles with Shijiazhuang plates are not allowed to go on the highway," said a source familiar with the matter, adding drivers of trucks from other places in Hebei also faced strict entry requirements or having to undergo 14 days of quarantine.
A salesman from Jingye Steel Group, a major construction steel rebar producer based in Shijiazhuang, said the company had been unable to ship out any products since Jan. 6 and had seen inventories surge 300% since then.
"We are looking for warehouses around the plant," he said on condition of anonymity. "The pressure is even bigger than last year as we are the (virus) epicentre this time."
Jinxi Group in Tangshan also said it was having to make room for rising stocks.
However, since steel consumption usually cools in winter as construction activity slows, analysts expect the impact to be manageable in the short term.
"Production at mills is normal so far as raw materials are mostly shipped via rail, which hasn't been affected yet," said Liu Xinwei, chief researcher from Sublime China Information.
"If inventories keep rising, however, mills could cut some output to ease pressure," Liu added.