SHANGHAI, Oct.11 (SMM) -- According to statistics from the Ministry of Railways, China's fixed-assets in railway during the first mine months totaled 344.16 billion. Fixed-assets investment in September amounted to RMB 72.66 billion, up 92.7% YoY and up 52.7% MoM. It is well-known that infrastructure projects in railway sector account for a large proportion in China's total infrastructure projects. During the 2008 financial crisis, Chinese government injected RMB 4 trillion for construction of infrastructure projects, which help boost China's domestic economy and push up steel prices. Steelease believes that steel prices shall further advance in the future and construction of infrastructure projects is still major driver for steel price increase.
Following the NDRC's approval for RMB 700 billion on 25 railway projects on September 5th, it approved another 30 projects on September 6th. These projects were largely highway, harbor engineering and sewage treatment projects. On hearing the news, steel futures prices began to rebound, which was the largest for the year, and prices of steel and iron ore also followed suit.
The previous tight liquidity also eased to certain extent from September. Based on result of Steelease survey on downstream producers, the composite PMI for transportation sector was 51.93 in September, up 2.52% MoM, and up 13.4% YoY. The growth in PMI is evidence that government investment on infrastructure projects indeed helps the whole industry to recover.
Steelease believes that infrastructure project construction is the major force to push steel prices after government began to rein in real estate sector. If the funds will be allocated in time for highway, port, and railway projects in the future, domestic steel prices may advance further.