SHANGHAI, Apr. 11 (SMM) – National Bureau of Statistics reported April 9 that China’s CPI rose 2.1% in March, while PPI fell 1.9% YoY. Steelease believes the probability of tightening monetary policies receded with the CPI growth falling back, which may help steel prices stabilize in April due to the following reasons.

First, inflation has always been an important basis for monetary policymaking in China, and economic policies are often made for ensuring growth and improving people’s livelihood. As March CPI growth fell below 3%, market concerns over tighter monetary policies moderated. Meanwhile, the continued decline in PPI implied that inflation may be modest in April. Thus, the government will unlikely tighten monetary policy given the slow economic recovery at present.

Second, M2 growth rose above 15% recently, compared with 13.8% recorded in late 2012, reflecting the central bank’s intention to loosen liquidity control so as to help drive economic recovery.

Third, Steelease survey revealed that liquidity was flowing into the market from banking system following banks’ quarterly review. Discount rates for large bank acceptance bills in Shanghai started to slip, with annualized rate down from 6.17% in late 2012 to 4.75% as of April 8, showing relaxed monetary conditions in the market.

Ample supply of capital will provide condition for traders and end users to purchase steel products and drive economic recovery which may in turn help push up steel demand. That, combined with lower-than-expected CPI data which reduced fears on monetary tightening, is expected to help buoy steel prices in April.