The futures of steel rebar increased by a significant amount in September. They reached CNY 3,170 / tonne.
The market was responding to the new stimulus measures that the Chinese government introduced.
After a key Politburo Meeting, the officials were committed to revitalizing a struggling housing industry, and creating positive future outlooks.
It is notable that the Politburo has placed a high priority on economic matters, since it is rare for such meetings to focus on these issues.
Steel demand is expected to increase, particularly in the manufacturing sector.
This initiative, by prioritizing the most important sector of our nation, suggests that associated industries can grow, especially in steel production.
Construction sector impacts
This fiscal stimulus package, which was recently announced by the Chinese government, clearly shows the intention to help heavily-indebted developers who are the world’s largest steel rebar consumers.
The government supports these companies to stop further economic downturn and encourage the completion of important projects that are crucial in maintaining the steel market.
This economic assistance is not without its downsides.
Beijing’s ongoing efforts to curb housing oversupply by limiting new construction pose a problem.
Construction activities being closely regulated, it is possible that steel rebar prices will fluctuate as the government attempts to cool the real estate market.
Supporting growth with monetary measures
The People’s Bank of China has launched a comprehensive monetary policy program in addition to the fiscal stimulus.
The central bank announced several measures this week to inject liquidity into the markets. These included cutting the interest rate, lowering reserve requirements, and creating innovative mortgage refinancing facilities under better conditions.
The changes to monetary policy will help both businesses and consumers reduce financial stress. The PBoC aims at stimulating demand for construction and housing projects by reducing the borrowing cost. This could in turn indirectly boost steel demand.
The combination of fiscal and monetary policies demonstrates a united effort to address the economic challenges posed by the pandemic, and its resulting fluctuations in the market.
The market sentiment and the future outlook
Market sentiment is mixed as the steel industry considers these events. Although optimism over fiscal stimulus could lead to an increase in buying, there are still concerns regarding potential stockpiles.
Experts and investors closely monitor government announcements to assess the impact and scope of proposed measures.
The predicted increase may also be hindered by the continued difficulties in the housing sector and government regulations on new developments.
While regulatory changes are likely to result in more gradual growth than anticipated, stakeholders realize the impending increase in demand.
Steel rebar futures prices in September rose due to China’s economic growth and government initiatives.
The announcement of new fiscal measures to revive the housing industry has sparked optimism. However, in the months ahead, supply management challenges and regulatory restrictions will be critical in shaping the future of the steel sector.
Maintaining a balance will be critical as industry participants adapt to the new climate.
For the moment, China is at a critical point in its economic journey, and steel demand could be a turning point.
The post Steel Rebar Futures Jump to CNY 3,170 : China’s stimulus measures boost the market optimism could be updated as new developments unfold.
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