Steel demand in China is likely to improve in the second half of the current calendar year (H2CY’22) in comparison with that of previous year with increased efforts by policy-makers to stabilize growth, particularly by boosting infrastructure construction, loosening the real estate market, and easing monetary policy.
Monetary policy: Monetary policy includes Reserve Requirement Ratio (RRR) cuts and interest rate cuts. It is anticipated that Chinese authorities will continue to cut the RRR and interest rates in Q2CY’22 or in H2CY’22. This in turn will provide support in the development of the economy.
Real estate policies: This policy is based on the city and is expected to grow. In the Jan-Mar’22 period, national real estate investments rose 0.7% y-o-y, while, the sales area of commercial housing fell by 13.8% y-o-y, and the funds in place for real estate development enterprises fell by 19.6% on the year, as per National Bureau of Statistics (NBS) data.
Therefore, the downward pressure in the real estate market is relatively large currently. But it is expected that measures will be taken to promote the sector and resume the suspended and postponed projects in the early stage.
Financial institutions are expected to lower their minimum downpayment ratios and loan interest rates for commercial personal housing loans and support the financing needs of real estate development and construction enterprises, to boost the economy.
In Q1CY’22, most of the banks lowered their mortgage interest rates by 20-60 basis points, which resulted in increase in average monthly real estate development loans by RMB 150 billion against Q4CY’21.
In addition to this, growth rate of investment rose by 10% for real estate projects with construction period of more than one year in Jan-Mar’22. The sales of commercial housing and real estate investment is anticipated to improve compared to the first half of CY’22.
Attractive export offers from China: At present, the international steel market is tight and prices are rising due to increased cost burden and shortage of supply. The price of steel products such as rebar and hot-rolled steel in the international market, especially in Europe, is much higher than that in the domestic market and is likely to continue to grow in the near term widening the gap between domestic and international prices.
Also, the depreciation of the Chinese currency, RMB, against the US dollar has made Chinese export offers competitive and attractive in the global market. Export offers are likely to rise in the second half of CY’22.
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