China drive to boost broader infrastructure could help its steel sector

A push to expand subway networks in some of China’s biggest cities along with a drive to boost broader infrastructure investment in the world’s No.2 economy are helping brighten the outlook for the nation’s mammoth steel sector. The northeastern cities of Jiangsu and Changchun, as well as Shenzhen in the south, last month announced plans to spend the equivalent of billions of dollars boosting their underground systems by a total of around 1,600 kilometers (1,000 miles), gobbling up steel as they expand. While the top state planner said it would ramp up investment in infrastructure and accelerate spending on projects that have already been approved, as the nation tries to spur economic growth amid a festering trade war with Washington. The steps, which mark a return to Beijing’s traditional playbook for boosting the economy, are good news for steelmakers in the world’s top producer of the material, who have been grappling with a slowing construction sector and weakening auto sales.

Mr Richard Lu, steel analyst at CRU in Beijing said that “The approval of the infrastructure spending will surely boost expectations of more steel demand and lead to a price rally in steel.”

The three cities’ subway plans will require about 80 million tonnes of the commodity, 10 percent of China’s annual demand, according to Reuters calculations based on industry standards for subway design, although that will be spread over a few years. In addition to high-strength steel track, the expansions will also need multiple stations, extensive underground building work using reinforced steel and rail cars made from alloy steel sheet rather than aluminum used in long-distance trains.
Source : REUTERS
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