Breaking News: China’s Recent Stimulus Measures Expected to Have Modest Impact on Steel Demand, Says UBS Analysts
In a recent report by UBS analysts, it has been revealed that despite the market excitement surrounding China’s recent stimulus measures, the impact on steel demand is expected to be modest. While prices surged by nearly 20% in late September, the long-term effect may not be as significant as some had hoped.
The stimulus measures, which include interest rate cuts, reduced mortgage payments, and increased funding for social housing, are primarily aimed at supporting consumers rather than boosting property and infrastructure investment. The property sector in China is still facing challenges with excess inventories and declining prices, while infrastructure projects are hampered by local government debt and a lack of economically viable new initiatives.
Although these efforts may help stabilize the economy, they are unlikely to lead to a major increase in steel demand similar to previous large-scale interventions in 2009 or 2015. Despite strong iron ore supply from key suppliers like Australia and Brazil, steel production in China has been relatively weak this year, leading to a rise in steel inventories at Chinese ports.
While there has been a seasonal uptick in production towards the end of September, the overall demand outlook remains uncertain. UBS predicts that the iron ore market will experience a moderate surplus in 2025, with prices stabilizing around $100 per ton.
In conclusion, investors should be cautious about expecting a significant boost in steel demand from China’s stimulus measures. The market may see some short-term effects, but the long-term impact is likely to be limited. It is important to monitor the situation closely and consider diversifying investments to mitigate any potential risks in the steel sector.