The Central Economic Working Conference was convoked in the fourth quarter 2012, and the urbanization construction was put forward further, and ever since then, the steel prices firmed up gradually from the chronic loss.
However, can urbanization essentially insipire China’s steel market?
Firstly, financing risks for local governments are enlarging. Coupled with the explosion of city construction investment bond, the potential risks had drawn the government’s attention, and on December 20, 2012, the National Development and Reform Commission (NDRC) announced to lay stress on governmental’s financing, consequently, the city investment construction bond will terminate the substantial growth.
Secondly, the Chinese Government will implement a proactive fiscal policy and a prudent monetary policy this year continuously and thus the financing growth will be slackened with capital supply shortage. Moreover, it still needs a long term to drive a mass of investments and demands even though the final solution on urbanization construction is to be passed.
Thirdly, the overcapacity of China’s steel industry exists still and once the urbanization construction activates, the capacity will release quickly with the recovery steel prices, and the steel market will vibrate downward if supply exceeds the demand.
Insiders indicated that although urbanization construction can promote demands for steel in the long time, it still remains to be seen in the short run.