The Chinese market has been focusing on the announcements of the National Development and Reform Commission (NDRC) today, October 8, after the week-long holiday in the country. Though the NDRC has continued “systematically to implement a package of incremental policies to solidly promote the upward economic trend,” according to a number of analysts the current measures are viewed as insufficient to support the development of strong domestic demand in China. As a result, steel futures prices in China sharply increased in the morning today, but fell later in the day, leaving sentiments mixed.
What are new supportive measures have been announced?
First of all, the NDRC announced RMB 100 billion (US$14.1 billion) to be issued in advance from the 2025 central budget and it will prepare the list of the major construction projects to be developed, using these spendings. This generally was assessed as “insufficient support” compared to expectations of many major analysts about for a total of at least RMB 1 trillion to be announced today. “Market expectations were high... But this is the NDRC, not the Ministry of Finance. Even though they didn’t announce a fiscal stimulus today, that doesn’t mean there won’t be a fiscal stimulus,” the South China Morning Post said, cited Ding Shuang, chief economist from Greater China and North Asia at Standard Chartered Bank.
Secondly, the NDRC will accelerate the full use of local government special bonds planned for this year. By the end of September, RMB 2.8 trillion ($396 billion) special bonds had been issued, while there are still RMB 290 billion ($41 billion) remaining to be issued. This amount is expected to be issued by the end of October.
Thirdly, the Commission said that it will step up efforts to develop 102 major projects under the 14th Five-Year Plan. Around 92 percent of the projects involved in this program have already started or have even completed construction. The other eight percent should be speeded up and start construction by the end of 2025. No additional specific spendings involved in the program have been specified.
Steel market reaction
The most popular rebar and HRC futures at Shanghai Futures Exchange have ended today at 0.43 percent and 1.07 percent higher respectively compared to September 30. “There is no firm billet or HRC offers [in the export market] even today, as the market changes dramatically. It soared in the morning, but now it is cooling down. Everyone is just watching,” a major Chinese trader commented tp SteelOrbis.
Average local rebar prices in China have settled at RMB 3,900/mt ($552/mt) ex-warehouse, being RMB 33/mt ($5/mt) higher compared to September 30, according to SteelOrbis. The average HRC price is at RMB 3,860/mt ($546/mt) ex-warehouse, moving up by a stronger margin, by RMB 155/mt ($22/mt) compared to the last day before the holiday.
The spot steel prices in China surged on the last day before the holidays, but today the market has retuned just cautiously optimistic. “The hike has already been high [on September 30]. We need to see how the high stocks will be eaten,” a local trading source said.