Citic sees ‘turning point’ for China’s steel industry this year
China’s steel industry is expected to see a “turning point” this year on additional stimulus measures and production cuts, even as overseas tariffs put pressure on demand, according to Citic Securities.
The introduction of more stimulus is expected to “stabilize demand for steel used in real estate and infrastructure sectors,” the Chinese investment bank said in a note. Deepening industry reforms are also likely to lead to a “larger-than-expected” reduction to supply, Citic added.
China’s steel industry has been one of the biggest casualties of the country’s prolonged property slowdown and softening economy, leading to a supply glut that Beijing has pledged to address. Tariffs and policies by Asian nations to stem the tide of cheap Chinese steel has added to bearish headwinds.
“Manufacturing is having a structural recovery,” Charlie Tang, one of the authors of the Citic research note, said by phone, citing sectors including ship and bridge building. “Infrastructure is also accelerating.”
Separately, an executive at iron ore miner Fortescue said the company was yet to see any signs of slowdown in Chinese steel output, noting inventories are “extremely” low. The Australian-based producer saw overall iron ore shipments climb 6% in its fiscal third quarter from a year ago.
“Our order books are still holding up well,” Ben Kuchel, director of sales and marketing at Fortescue, said during an earnings call on Tuesday.
Steel rebar was 1% lower on the Shanghai Futures Exchange at 12:26 p.m. local time on Tuesday, while hot-rolled coil dipped 0.8%. Iron ore futures in Singapore slipped 0.3% to $98.10 a ton and yuan-priced futures on the Dalian exchange also dropped.
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