The “dark days” of China’s steel market are over

Thanks to the concerted efforts of the whole country, the epidemic situation in China has been improved. Excluding foreign imports, the number of confirmed cases in most provinces and cities has reached zero. The resumption of work and production such as agriculture greenhouse in the country is gradually into a better situation. It is expected that after entering the second quarter, with the gradual lifting of relevant restrictions, consumption and investment activities rebounded rapidly, domestic steel demand showed a large increase and inventory pressure significantly reduced. Moreover, the impact of the epidemic has strengthened counter-cyclical adjustment, adding new impetus to infrastructure investment.

According to media reports, new infrastructure investment alone will reach one trillion yuan this year. On the financial side, efforts to support infrastructure construction have been intensified. According to the ministry of finance, as of March 20, China had issued 1.023.3 billion yuan of special bonds, all of which were used for the construction of railways, rail transit and other transportation facilities, as well as major infrastructure projects in areas such as ecological protection, solar greenhouse, forestry, water conservancy, municipal administration and industrial parks. In addition, in order to strengthen counter-cyclical adjustment and the need for steady economic growth, the people’s bank of China will further loosen its monetary policy. It is expected that the growth rate of national infrastructure investment, including the curtain wall building, will be significantly increased to more than 6% this year, which will lead to the strengthening of steel demand after March, especially the demand for construction steel, and the digestion of huge inventories.
Under such pressure, the Federal Reserve has expanded its unprecedented quantitative easing program. On March 23, the Federal Reserve announced broad new measures to support the economy, continuing to buy Treasury bonds and mortgage-backed securities to support the smooth functioning of the market. Starting this week, it will buy $75 billion in Treasury bonds and $50 billion in agency mortgage-backed securities each day, with no ceiling and the quoted daily and regular repo rates reset at 0%. At the same time, the Federal Reserve also announced the expansion of the money market liquidity facility scale. This is the most aggressive market intervention by the Federal Reserve so far since the outbreak of covid-19 in the United States. There is also a $2 trillion fiscal stimulus package in the works. Other countries are expected to follow suit, with both fiscal and monetary policy. All these measures will greatly support the world economy and boost market confidence of aluminium curtain wall. As a result, the U.S. stock market has surged across the board recently.