Railway Steel Demand May See Steady Growth

SHANGHAI, May 29 (SMM) -- Premier Wen Jiabao emphasized at the executive meeting of the State Council on May 23 to promote regular implementation of major “12th Five-Year Plan” projects and accelerate construction of railways and other infrastructures. Steelease believes that in the context of the current national economic slowdown, the government is high likely to introduce fiscal policies to stimulate the economy, led by the railway infrastructure projects. Therefore, compared to other downstream industries, steel demand in the railway industry should say steady increase in the second half of this year.

Currently, the biggest problem restricting railway construction is funding, currently the Ministry of Railways is debt-ridden. China’s recent polices to encourage and guide private investment in the railway and bring railway projects to local public resource trading markets etc. are expected to ease the rail industry's financial problems and speed up construction in the railway industry.

In addition, according to the latest Steelease PMI index on steel downstream in May, transportation infrastructure and home appliances are the only two sectors above 50. The transportation infrastructure industry has the highest and stayed above 50 for 4 successive months. The railway industry accounts for a large proportion of the transportation infrastructure sector, Steelease believes that the transportation infrastructure sector PMI index illustrates orders and operating rates in the railway industry is still warming in general despite worsening climates for other sectors.

China’s railway fixed-asset investments have experienced substantial growth during the "11th Five-Year Plan" period. Steelease expects China's railway industry to enter a period of steady development during the "12th Five-Year Plan” period and fixed-asset investments in the sector is expected to reach RMB 600 billion, which will lead to stronger steel demand in the railway industry.