Chinese policymakers pledged more attention to stabilise economic growth amid fears that the country’s economy may slow further in coming months.
The world’s second-largest economy has faced strong headwinds, including skyrocketing commodity prices, financial risks represented by the Evergrande crisis and an electricity shortage.
New measures have already begun to kick in with the People’s Bank of China (PBOC) lowering the reserve requirements most banks must hold by 50 basis points.
Market participants and industry watchers told S&P Global Platts that these cuts are leading to signals of further monetary policy easing in 2022. They also expected policies surrounding steel demand and supply to be eased in a bid to stabilise economic growth next year.
The Chinese government has also stressed the importance of stability in its property sector, an industry that accounts for more than 30% of the country’s total steel consumption.
Market sources told S&P Global Platts that China’s domestic steel industry is unlikely to face any tougher steel output cuts or further restrictions in the near term.
"Oversupply is likely to continue in the domestic steel market in 2022, especially in the first half as steel production is set to recover, but any policy easing, starting from December, will take some time to reach steel end-users, such as property," one mill source said.
Aussie miners can breathe a sigh of relief as China's steel industry is unlikely to face tough measures anytime soon.
Earlier this week, China's customs data for November iron ore imports reported a 14.6% increase on the month and 6.9% increase year-on-year to 104.96m tonnes.
The encouraging figures have helped iron ore prices stabilise around 6-week highs of US$110/t.
That said, China appears to be taking a cautious approach to stimulus, with a focus on stability as opposed to the rampant stimulus it delivered in the first half of 2021.
Nevertheless, Fortescue Metals (ASX: FMG) has popped 6.5% this week to a near 3-month high.
Get the latest news and insights direct to your inbox