Chinese Steel, Iron Ore Industry Gains on Central Bank’s New Policy

A worker walks by rolled up steel sits in the ArcelorMittal Dofasco steel plant in Hamilton, Ontario, Canada, March 13, 2018 (Photo: REUTERS/Mark Blinch/File Photo)

China's steel and iron ore industry started strong this week while backed by central bank's new policy that eases its lending to companies as they hope that China and the United States agrees on a comprehensive trade deal.

On Friday, China's central bank decreased its amount of cash for savings to release more than $116 billion for new lending. The United States delegates and their Chinese counterparts were scheduled to meet this week in Beijing. It is the first face-to-face talks of the two sides since President Donald Trump and President Xi Jinping agreed to a 90-day truce in their 9-month long trade war in December.

The new policy came was announced following the national rail operators announcement of planned 6,800 km new track this year.

Analysts from Huatai Futures said that the market is improving its expectations over the macro-economic situation because of China's attempts to stabilize its economy.

The largest listed steel firm in China, Baoshan Iron & Steel Co, announced that it will increase the prices of some steel products by 50 yuan a ton for its March delivery. The construction steel rebar on the Shanghai Futures Exchange SRBcv1 was sold higher by 1.8 percent at 3,520 yuan per tonne. The price of the rebar reached 3,526 yuan as the market closed at 0700 GMT.

Analysts warned that the demand for metal this off-peak season will drop. The data compiled by the Mysteel consultancy showed that the Chinese trader's inventories of steel products increase within two consecutive weeks until January 4. It added the prior week's 416,000 tonnes to 8.38 million tonnes. Rebar stocks also increased by 6.4 percent reaching 3.35 million tonnes while hot-rolled coil socks rose by up to 2.5 percent at 1.8 million tonnes. The production of steel in northern China halted due to the freezing weather conditions brought by the winter season.

 Analysts are currently on the lookout for the outcome of the Sino-U.S. trade talks. They are looking for factors that might ease pressure on China's economy.

On the Dalian Commodity Exchange, the most active iron ore contract closed higher by 1.8 percent at 514.5 yuan per tonne. Prices of coking coal futures also increased by 1.5 percent closing at 1,195 yuan and coke to be delivered on May closed higher by 1.5 percent to 1,964 yuan.

Commodity markets believe that China's efforts to stimulate its economy by boosting infrastructure spending will produce a positive outcome for its economy.

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