- Steel prices are
expected to display a firmer rebound in infrastructure spending boost.
- The headwinds of
Covid-19, real estate slowdown, and monsoon season are fading away.
- A decline in
China’s inflation rate will force the PBOC to scale up its dovish stance.
Steel
prices remained in a negative trajectory for a tad longer period as Chinese steel
mill owners halted the production process to scale down their expenses due to
already unsold inventories. The metal prices are expected to display a stellar
recovery as the Chinese administration is announcing stimulus packages to boost
infrastructure spending.
Earlier,
the headwinds of a resurgence in Covid-19, environmental issues due to steel
production smelters, a slowdown in the real estate sector, and the arrival of
monsoon season in various provinces of China and other parts of Asia had
restricted the steel demand. As slowdown worries have reached the rooftop, the
Chinese administration has announced significant stimulus packages to scale
down the former.
In addition to the $44 billion stimulus announced at June end, the
administration has publicized another $4 billion in quotas for infrastructure
spending. As the projected infrastructure spending will kick-start, prices of
steel will witness a decent buying interest.
Meanwhile, the Chinese economy has come out with a decline in
inflation numbers. China’s Consumer Price Index (CPI) has landed at 2.5%,
lower than the expectations and the prior release of 2.8% and 2.7% respectively
on an annual basis. While the monthly figure is negative by 0.1% against 0.2%
of expectations and 0.5% of former release.
A decline in China’s inflation will force the People’s Bank of
China (PBOC) to sound dovish and trim the Prime Lending Rate (PLR) further.
And, more liquidity flush into the economy will spurt
the volumes in economic activities, which will eventually improve the steel
demand vigorously.