The largest steel industry in the world has issued another warning against the backdrop of local manufacturers’ concerns about the coronavirus outbreak – total national inventories of steel rebar have reached record-high levels. The growth reflects supply chain disruptions caused by disease and efforts to combat it. Rebar is used in construction and in many projects that are currently stalled due to contamination.

“Demand for steel is expected to fall further than production and therefore stocks will increase significantly from first-quarter levels”, said a Citigroup note.

China’s steel sector – which accounts for more than half of world production – is in turmoil because of a coronavirus that has affected transport routes, causing workers shortages and limited demand.

Signs of a rapid increase in steel reserves may increase the pressure on iron ore prices.

Stocks, which show high seasonal fluctuations and typically peak in March, jumped 14% to 10.8 million tonnes last week, the highest level so far, according to Beijing Custeel E-Commerce Co data. Last year, Chinese steel companies managed to process nearly 1 billion tonnes of steel.

The Chinese Iron and Steel Association recently commented on the “high level” of the stock and called on its members to effectively curb production. Separately, RBC Capital Markets said the construction sector in China is “still in the process of stopping effectively” and predicts growth in both steel and iron ore reserves.

Rebar prices are strongly affected by the worsening of the coronavirus epidemic. After reaching its lowest level since 2017 last week, the spot price stabilized on Friday and rose 0.4% on Monday to record its first growth since mid-January.