Posted on 23 Nov 2020
In a regular meeting of the State Council on November 18, China’s central government issued a clear signal that it intends to strongly lift domestic consumption of automobiles and home appliances. Chinese steel market sources believe that Beijing’s declaration of support for both sectors will help boost demand for flat steel and in turn, give their prices – already at highs for the year – another fillip.
China’s Premier Li Keqiang stated at Wednesday’s meeting that China will continue to expand domestic demand, promote further consumption of commodities in certain industries and release the consumption power of the country’s rural areas. The sectors he mentioned specifically include the steel-consuming behemoths of auto-manufacturing and white goods.
"At present, the prominent restraint on economic development lies in consumption, as the main growth engine was seriously affected by the COVID-19 pandemic earlier this year,” Li said. Consumption has been picking up in the past few months, but notable difficulties still remain in restoring normal growth”, state-run China Daily quoted him as saying.
To stabilize and expand auto consumption, Li stated that Beijing is encouraging local governments to ease and optimize the buying restrictions on passenger vehicles, and to release more quotas for the issuance of license plates.
China will also launch a new promotional campaign to lift auto sales in rural areas, the meeting agreed. The proposal envisages encouraging rural residents to buy trucks below 3.5 tonnes and automobiles with engines no bigger than 1.6 litres, and offers citizens who buy new cars subsidies to replace their old vehicles conforming to superseded National Emission Standard Stage-III now in the process of being phased out. The central government also intends to step up the building of charging units for electric vehicles and parking lots.
Wednesday meeting also restated the government’s commitment to promoting consumption of home appliances and furniture, along with boosting services in other areas such as tourism.
“This is rather clear signal from Beijing. The last round of promoting vehicle sales in rural areas – which started in July – helped to significantly increase car sales,” a Shanghai-based market insider commented. “Now that the new round is being launched, I am sure it will give sustained support to flat steel consumption,” she told Mysteel Global.
China’s monthly auto sales
Source: China Association of Automobile Manufacturers
Since July, China’s auto sales have been on a steady upward trend. In October, domestic auto sales reached 2.6 million units, up 12.5% on year, as Mysteel Global reported.
“There is good news all round, and steelmakers with sheet rolling and coating facilities are going crazy,” an official from a steel mill based in North China’s Hebei commented. Most of his company’s products are used in the auto and white goods industries.
“Our sales of cold-rolled products are pretty good. In fact, our orderbook for the rest of this year is full and now we are taking orders for January,” he said. Flat rolled prices still have some room to grow, he suggested, but he also admitted that his buyers are showing some resistance to paying such high prices now.
With already robust demand in the country’s auto and appliance sectors, especially since the July-September quarter, Chinese flat steel prices are already standing at new highs. The price of Q235 4.75mm hot-rolled coil, for example, stood at Yuan 4,095/tonne ($624.2/t) as of November 19, a new high since November 2018, whereas the price of SPCC 1.0mm cold-rolled coil was at a near three-year high of Yuan 4,977/t on the same day. Both prices include 13% VAT.
Mysteel’s weekly survey showed that capacity utilization of the 29 cold-rolling mills checked regularly had increased for four weeks in a row to reach 83.1% as of November 18, the highest since April 2019. “Although output has kept rising, cold-rolled inventories have still been dropping,” a market correspondent noted.
Inventories of CRC in 26 Chinese cities have declined for six consecutive weeks to reach 1.1 million tonnes as of November 19, down 2% on week or flat compared with the same period last year, according to Mysteel’s latest survey.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
Source:Mysteel Global
