The pandemic has caused supply chains and product lines disruptions that even developed countries such as member states of G-8 are challenged to contain the economic effects of the crisis to the global economy. Hence, a report claimed that the difficulty of these states in containing the adverse effects of the pandemic to their respective jurisdictions may hint that the global economy may experience worsening inflation rates in the coming months.
The latest economic conjunctures showed iron and steel industries would need higher capital in 2020 compared to previous years. Market experts then claimed that the problems experienced by companies operating in the supply chain and sales channel sectors would continue to worsen until April, May, and June this year. The report then suggested that if the US, Germany, and China would fail to sell its existing stocks, the global market may experience significant rises in inflation rates.
The experts looked at figures related to the construction sector and suggested that sales figures would continue to decline in both China and Europe caused by significant drops of demand in the industry in previous months. Steel prices worldwide were seen stagnant also due to the declining demand, but it would be too early to properly estimate the direct effect of the pandemic on the global iron and steel industries.
It was, however, show that increases in the costs of iron in China and other Asian markets have been below traditional levels. Market sources also manifested that the prices may decrease further due to adverse demand in the US for industry products and services and that unemployment rates would also continue to increase in the US.
From a technical point of view, economic experts then predicted that a global drop in prices for scrap iron would indirectly result in price declines for main producers as well. According to a classical growth analysis, the normal price would be at 51 USD per ton. However, three out of five large steel producers in the world have stopped production and would only resume by mid-April. The sale of existing stocks was also seen at their record lows.
Despite the low-interest rates imposed by states' central banks, domestic markets continue to experience extremely weak data on promoting consumer demand amid the pandemic. Hence, postponements of new construction and heavy industry investment projects would last until the third quarter of 2020. It was also revealed that investors have been taking their cash savings to safer investments that the experts suggested the impact of the pandemic on the global economy would be at least three trillion USD.
The experts also suggested that the most significant loss would be reflected in the financial and real estate sectors. There would also be a higher probability that in the next few months, the country would need higher foreign financing as countries brace for turbulence and weaker financial capacities. Hence, the report suggested that greater inflation rates are to be expected for the rest of 2020.
