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China: Q3 GDP rebounds; crude steel output dips in Jan-Sep. How will CY22 pan out?

China: Q3 GDP rebounds; crude steel output dips in Jan-Sep. How will CY22 pan out?

China's economy regained some momentum in the third quarter (July-September, 2022), growing by 3.9% y-o-y, as per the much-awaited data unveiled by the National Bureau of Statistics recently. It is a comeback from the negligible 0.4% y-o-y growth seen in Q2.

·         Crude steel output drops in Jan-Sep - Crude steel output over January-September touched 780.83 million tonnes (mnt), a y-o-y drop of 3.4%. However, the September 2022 production was up 17.60% y-o-y to 86.95 mnt while the national average daily output in September was 2.898 mnt, a m-o-m rise of 7.13%.

·         Steel exports down - China's finished steel exports totalled 51.21 mnt over January-September, down 3.4% y-o-y as the world grapples with sluggish steel demand. Finished steel imports dropped 22.1% y-o-y to 8.34 mnt during the same period.

·         Jan-Sep sees drop in iron ore imports - Imported iron ore in September 2022 was at 99.71 mnt, up 4.3% y-o-y. Over January-September, 2022, iron ore imports totalled 822.542 mnt, dipping 2.3% y-o-y amid widespread Covid, demand drop and production cuts.

·         Coal imports down in Jan-Sep - China's coal and lignite imports in September 2022 were at 33.048 mnt, up a marginal 0.5% y-o-y. From January to September, coal imports were at 200.92 mnt, down 12.7% y-o-y amid rise in domestic production for ensuring winter heating.

Steel market fluctuates

The Chinese steel market has been showing marginal fluctuations. Last week, the market was down slightly. Most of the finished products, including hot rolled coils (HRCs) and medium and heavy plates, fell by RMB 30-100/t compared to the previous week.

Individual markets such as Shanghai, Hangzhou, Sichuan and Chongqing rebounded slightly, while the HRC price fall was also halted in Tianjin and Shanghai. However, the overall trading sentiments were still weak.

Several regions were impacted by Covid outbreaks, especially in Shanxi, Shaanxi, Inner Mongolia and other places, resulting in a mismatch between supply and demand of raw materials and rising inventory.

On the other hand, the futures-spot spread widened, especially for coke.

Two-thirds of October has passed, but the market still has not improved. The futures market took the lead in continuously testing new lows. In the second half of last week, both prices and trade deals showed signs of weakening. Moreover, finished products affected raw materials, and hence the second round of increase in coke prices did not happen. Iron ore showed a w-o-w decline, pressuring down finished products prices and profits.

Outlook

The government continues to direct financial institutions to offer concessions in a bid to boost liquidity and promote employment. It may further offer benefits to boost the economy. The aim is to bring back market confidence.

There is still demand from infrastructure construction. Mills are expected to keep a watch on the performance of the construction sector after the week-long conference of the Communist Party in a bid to seize the last wave of construction demand before winter sets in.

A recent easing in real estate investment policy will leave a financing channel open for housing companies.

However, as a global recession gathers steam amid inflation and monetary tightening across nations, it is feared China may not achieve its targeted 5.5% growth in 2022.

Source: Steel mint

Oct 26, 2022 12:03
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