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China’s Steel Market has Huge Development Space in the Second Half of 2014

In the first half of this year, China’s economic data is not very ideal, economic downward pressure is bigger, which lead to the steel market downturn, benefit of iron and steel enterprise is not good. In spite of this, China’s steel market doesn’t lose vitality, regardless of the increasement in consumption, higher costs, supply inhibition and other various of aspects, China’ s steel market has a huge space of imagination.

1. Possiblity of China’s central bank lowering the deposit reserve rate is increasing, monetary policy tends to loose
Date of the first four months of this year shows that China’s economic downward pressure is very big. Industrial production, fixed asset investment, trade exporting, real estate sales, enterprise benefits, fiscal and tax conditions are not ideal. Continued weak demand situation asked the central government to increase the steady growth. At the same time, CPI hit a 18 month low and PPI for 26 months in a row of declining provide space for looser monetary policy.

2. Developed countries to continue the momentum of economic recovery, to stimulate China’s steel exports strong growth
 In 2014, despite some twists and turns, but European and American developed country’s economic recovery has not changed. Overseas developed country’s economic recovery stimulate the growth of China’s steel exports. According to customs statistics, the first four months of this year, the export of steel 25.87 million tons, up 29.5% from a year earlier, among which 7.54 million tons in April, growth of 35.9% year-on-year. On the basis of calculation, China’s crude steel directly export will reach or exceed 80 million tons in 2014.

3. Uncertain factors increasing may make some raw material supply blocked
In the second half of the year there are some uncertain factors, such as El Nino this extreme weather event, which may make some metallurgical raw materials supply blocked.

4. Environmental protection efforts to enhance, inhibiting the marginal capacity release
In the case of the current low steel prices, increasement in spending of the environmental protection is bound to lead to reduce the profits of iron and steel enterprise, and even heavy losses, eventually forced some disadvantages enterprise to reduce or stop production, which inhibit the release of some capacity.