China's steel market to gain from infrastructure spend: traders

China's steel market was expected to see stronger demand growth by mid-year if expectations the country's infrastructure fixed asset investment or FAI growth rate was boosted to around 10% year on year in 2020 from 3.8% in 2019 were realized, market sources said Tuesday.

The Chinese government has indicated it plans to increase stimulus in the infrastructure sector after the FAI growth rate turned negative in the first quarter. The country's infrastructure FAI growth rate plunged 19.7% on year in Q1, but was being forecast at around 15% for the remaining nine months of the year, which would generate decent incremental steel demand, market sources said.

An increase in demand for infrastructure development would also help offset a likely reduction in demand from property new starts, they noted.

The demand generated by infrastructure construction was expected to emerge in May or June after more details of the stimulus measures were announced during the National Congress and political consultative conference, market sources said. Both key planning events are expected to be held in late April or May.

China's Political Bureau (Politburo) during its meeting last Friday pledged to introduce greater fiscal and monetary stimulus to offset the "unprecedented adverse impact" of the coronavirus pandemic on the country's economy.

Political Bureau (Politburo)

Infrastructure was singled out as a key sector to be boosted in a bid to stimulate employment, while property was earmarked as "for living not for speculation" to prevent further overheating.

Some sources said that construction-related steel demand would be stronger in the third and fourth quarters than in Q2, but cautioned strong steel production, stemming from capacity expansion over 2019 and the first half of 2020, would continue to keep steel prices in check.

-- Analyst Jing Zhang