Investment services Moody said on Wednesday that South Korean steelmakers will suffer a sharp decline in demand and prices due to the increasing coronavirus impact on the steel industry and related industries.

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“In Korea, we expect domestic and export demand to drop significantly, reflecting lower automobile production and sluggish housing construction. Korean steelmakers are heavily exposed to the industry.” cars and are therefore vulnerable to the decline in automobile production, “a Moody’s report showed.

Local steel manufacturers, such as POSCO, Hyundai Steel Co. and Dongkuk Steel Mill Co., which has suffered weaker demand from construction and shipbuilding companies since the 2008 financial crisis.

They also now face weak demand from the automotive sector due to the COVID-19 outbreak.

On the supply side, steel producers will cut production but not to the extent that it is enough to limit oversupply. The accumulation of steel inventories is likely, due to the weak end markets and the difficulty of significantly reducing blast furnace usage, the report said.

“With these factors, coupled with weaker distribution prices in China and rising steel inventories, prices and spreads will fall further over the next 3 months,” the source said.