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Chinese steel output set for ‘remarkable’ rebound

China’s steelmakers are confident the industry will bounce back strongly after the coronavirus downturn, echoing a forecast from the world’s two largest metal ore miners.

Weakened demand for the alloy will forge a strong recovery in the second quarter as new investment in production infrastructure begins and the industry resumes operations after the coronavirus downturn, the China Iron and Steel Association (CISA) said in a statement Wednesday.

CISA official He Wenbo forecast the quarter-on-quarter growth would be “remarkable”, citing stimulus from demand-side plans, including renovation projects of old urban residential areas and enhanced investment into “new infrastructure”.

China’s consumption of steel plummeted as economic activity declined in the first quarter, and sluggish demand both at home and abroad battered prices, fuelling an inventory surge.

The China Steel Price Index hit 96.86 in the second week of April, the lowest level since May 2017. Inventories of key steel companies hit 17.95 million tonnes in early April, rising 88.32 percent from the start of the year.

The rebound is forecast to be driven by the intensification of a programme to renovate old urban residential areas this year, with 39,000 communities to see upgrades that will benefit an estimated seven million households.

The buoyant prediction comes after Anglo-Australian miner BHP said it expects China’s furnaces to increase production this year, as long as the country doesn’t face a second wave of infections.

London-headquartered rival Rio Tinto’s chief executive Jean-Sébastien Jacques last week said China’s resumption of industrial activity would stimulate demand again from the world’s largest consumer of raw materials.

Meanwhile, a number of local Chinese governments have already unveiled guidelines to boost spending in new infrastructure. Planned investment in 31 provincial-level regions totaled 6.7 trillion yuan ($947 billion) this year, with 23% involving new infrastructure, data compiled by Huatai Securities showed.

The majority of steelmakers tracked by CISA had resumed production amid a broader reopening of the Chinese economy, with 178 out of 191 enterprises back on track as of April 19.

To keep the steel industry stable, CISA called for firms in the sector to organize their production on demand, enhance communication and strengthen cooperation in the industrial chain.

Efforts should be made to deepen supply-side structural reform and further crack down on illegal expansion activities of production capacity, the association said while emphasising green development and intelligent manufacturing in tandem with the latest policies on new infrastructure.
Source: Asia Times

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