China's steel market will pick up steam in mid-year thanks to infrastructure incentives

China's steel market is projected to see stronger demand growth by mid-year if expectations for realizing capital investment in infrastructure are increased to about 10% YoY in 2020 from 3.8% in 2019, sources said. Tuesday.

The Chinese government said it plans to increase incentives in the infrastructure sector. Infrastructure growth in the country fell 19.7% year-on-year in the first quarter, but was forecast at around 15% for the remaining nine months of the year, which will provide a decent boost in steel demand, market sources said.

They also noted that the increase in demand for infrastructure development will also help offset a possible decrease in demand from new properties.
Infrastructure-driven demand was expected to emerge in May or June after more details on the stimulus measures were announced during the National Congress and a political consultation conference, market sources said. Both key events are expected to be scheduled for late April or May.

China's Politburo (Politburo), during its meeting last Friday, pledged to introduce additional financial and monetary stimulus to offset the "unprecedented negative impact" of the coronavirus pandemic on the country's economy.

Infrastructure has been singled out as a key sector to be stimulated to stimulate employment, while real estate has been singled out as "for living, not speculation" to prevent further overheating.

After a Politburo meeting, the People's Bank of China on Monday announced a cut in key loan rates - a proxy for interest rates on loans in China - from 4.05% to 3.85% for one-year loans and from 4.75% to 4.65%. for five-year loans.

On the same day, the country's finance ministry said it would soon approve another batch of local government special bond quotas totaling 1 trillion yuan ($ 141.4 billion), bringing the total quota for 2020 to 2.29 trillion yuan, which will all be released towards the end. May. The special bonds are meant to speed up infrastructure construction in 2020 and cannot be used for real estate projects.

Some market sources expect that interest rates on loans in China will be further reduced later this year and the local government special bond quota will be increased to 3.5 trillion yuan, which will boost the growth rate of infrastructure development to about 10% over the year.