Posted on 29 Apr 2022
The Chinese government will promote infrastructure construction in all-around way to boost domestic economic and social development, according to a top economic meeting chaired by President Xi Jinping late on April 26.
The meeting of the Central Financial and Economic Affairs Commission was held against a background of COVID-19 outbreaks in many cities and regions including the country's economic heart of Shanghai and more recently, in the capital Beijing, that continue to threaten domestic economic growth, Mysteel Global noted.
"The central government is getting worried (about the downward pressure on the economy)," a Shanghai-based industry source commented.
In the meeting, the government pledged to step up construction of transportation, energy and water resources, including low carbon energy bases, and oil and gas pipeline networks, inter-city rail networks and regional and cargo airports.
In addition, construction of new types of infrastructure such as supercomputing, cloud computing and broadband networks would be given a boost.
These infrastructure projects need to be launched in batches and would be funded from a variety of sources, encompassing central and local government investment, state-owned or private capital, meeting delegates agreed.
On Wednesday, Chinese stock markets reacted positively to the previous evening's meeting, with the indexes of the Shanghai Stock Exchange and Shenzhen Stock Exchange rebounding notably by 2.5% and 4.4% on day after several days of slumps.
In contrast to the stock markets, China's ferrous futures market showed limited reaction to the news, even though infrastructure investment is a key downstream sector of the ferrous industry, Mysteel Global noted.
The most-traded rebar contract on Shanghai Futures Exchange for October delivery, for example, only nudged up 0.98% from the settlement price at Tuesday's close to settle at Yuan 4,864/tonne ($742.6/t) as of Wednesday afternoon's trading session.
"China's ferrous futures participants had long factored-in the likelihood of such positive steps being taken," a Shanghai-based ferrous futures researcher explained. "Even though steel consumption and sales have already been seriously hit by the virus since March, ferrous futures prices had climbed significantly driven by strong expectations (of robust steel consumption returning once the virus is controlled)," he noted.
"At present, futures prices are really stuck in a limbo, as prices had soared in March on such hopes but for now, you still cannot tell if these will be realized or not – with the COVID-19 lockdowns still in place and regardless of whether they're expanded further," he commented.
Source:Mysteel Global
