Steel Market Macro News Roundup

SHANGHAI, Dec 13 (SMM) 

The People's Bank of China decides to increase the foreign exchange deposit reserve ratio of financial institutions.

In order to strengthen the foreign exchange liquidity management of financial institutions, the People’s Bank of China has decided to increase the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points from December 15, 2021, that is, increase the foreign exchange deposit reserve ratio from the current 7% to 9%.

Many cities cut mortgage interest rates.

Recently, some cities have released news of lower mortgage interest rates, and the level of mortgage interest rates in various regions has also diverged to a certain extent. According to the data on mainstream mortgage interest rates in key cities released by the Shell Research Institute, the mainstream first home loan interest rate in 100+ cities monitored by the Shell Research Institute in November was 5.69%, a drop of 4 basis points from October; the second home loan interest rate was 5.96%, which fell by 3 basis points from October. In addition to changes in mortgage interest rates, mortgage lending time in many cities has also generally been shortened. According to feedback from various banks, the time for mortgage loans has generally been adjusted from the previous “unpredictable” “waiting for more than half a year” to “within 1 month to 3 months”. Some banks even stated that, according to the current situation, the time is only 1 working day the fastest, but they do not promise the loan time. However, many banks also stated that the time of lending is unpredictable and the borrowers need to queue up for lending.

The first batch of coal medium and long-term contracts for 2022 completed the signing process.

The 2022 Coal Trade Fair was held in Rizhao. Coal production companies from Shanxi, Shaanxi, Inner Mongolia as well as some large domestic power generation, steel, and heating companies signed medium and long-term contracts. The first batch of contracts involved more than 260 million mt of coal. According to the statistics of the China Electricity Council, from January to October, the increase in coal prices has caused an additional 431.8 billion yuan in coal procurement costs for coal-fired power plants across the country. The signing of a reasonable medium and long-term contract between coal companies and power plants in 2022 will help power plants control procurement costs and ensure national energy security.

State Council: It is strictly forbidden to issue penalties and confiscation targets, and one-size-fits-all orders to suspend production and business are not allowed.

The State Council issued the Notice on Further Implementing the “Administrative Punishment Law of the People's Republic of China" to further regulate the implementation of administrative punishments. It is necessary to fully and correctly perform the functions of administrative punishment in accordance with the law, and it is not allowed to impose administrative punishments in violation of the law or punish for the purpose of punishment. The profit-seeking law enforcement or the action of setting penalties and confiscation targets shall be eliminated. It is necessary to standardise the setting and use of electronic monitoring equipment. The relative parties must not implement administrative penalties such as ordering to suspend production and business, or ordering to close down without solid facts. It is necessary to improve the legal responsibilities scheme, and refine the system for refunding illegal income.

Global new ship orders hit an 8-year high! China's shipbuilding industry secured the championship.

In the first 11 months, global new ship orders increased by nearly 140% year-on-year, a record high in eight years. South Korea’s shipbuilding industry once again ranked first in the number of orders received in November, but China’s shipbuilding industry basically secured the championship of new ship orders throughout 2021. For the shipbuilding industry, this may be the best result that everyone is happy about. Statistics show that from January to November this year, the global new ship transaction volume was 45.07 million CGT, an increase of 138% compared to 18.97 million CGT in the same period last year. This is also the highest record in 8 years since the new ship turnover reached 53.63 million CGT in the same period in 2013. What is striking is that among the cumulative global ship orders in the first 11 months of this year, China’s shipping companies ranked first with 49% of the global market share, and South Korea ranked second with 38%. China has surpassed South Korea by 11 percentage points. With only one month left in 2021, it is almost a foregone conclusion that China's shipbuilding industry will win in terms of this year's new ship orders.

On December 3, China Evergrande Group issued an announcement through Hong Kong Stock Exchange that it could not perform its guarantee obligations, and the Guangdong People’s Government held an interview on this issue.

China Evergrande Group issued an announcement on the Hong Kong Stock Exchange on December 3 that it could not perform its guarantee obligations. The People's Government of Guangdong Province paid great attention to this and immediately held a meeting with Mr. Xu Jiayin, the actual controller of China Evergrande Group. At the request of Evergrande Real Estate Group Co., Ltd., in order to effectively resolve risks, protect the interests of all parties, and maintain social stability, the People's Government of Guangdong Province agreed to send a working group to Evergrande to supervise and promote risk management, and urge the effective strengthening of internal control to maintain normal operations.

Economic Blue Book: To actively promote a soft landing in real estate industry.

The Economic Blue Book: Analysis and Forecast of China's Economic Situation in 2022 issued by the Academy of Social Sciences pointed out that it is necessary to actively promote the "soft landing" of the real estate industry, while preventing frequent land auctions. While insufficient land supply in hotspot cities will lead to a rapid increase in housing prices in the later period, and it is necessary to prevent the rapid decline in housing prices in fourth and fifth-tier cities from causing collateral risks.

In November, the real estate financing of financial institutions continued to rise MoM and YoY.

According to the financial management department and many banks, on the basis of the sharp rebound in October, real estate loans in November continued to maintain a MoM and YoY growth, and the YoY growth is expected to top expectation by 200 billion yuan. According to Wind statistics, in November, the domestic bond issuance of real estate enterprises amounted to 47.1 billion yuan, an increase of 84% from the previous month. With the gradual clarity of the short-term impact of the Evergrande incident, the industry is expected to improve further, and the financing of real estate companies by financial institutions has returned to a normal state.

Central Economic Work Conference: Newly added renewable energy and raw materials’ energy consumption are not included in the total energy consumption control.

The Central Economic Work Conference was held in Beijing from December 8 to 10. The meeting emphasised accurate understanding and implementation of carbon peaking and neutrality. The gradual withdrawal of traditional energy should be based on the safe and reliable replacement of new energy. It is important to increase the ability to coordinate new energy, and promote the optimal combination of coal and new energy. It is also key to tackle key problems in green and low-carbon technologies. Scientific assessment is required. Newly added renewable energy and raw materials’ energy consumption are not included in the total energy consumption control. And it is important to transit from "dual control" of energy consumption to "dual control" of total carbon emissions and intensity as soon as possible, and accelerate the formation of incentive scheme regarding pollution reduction and carbon reduction. To ensure energy supply, large enterprises, especially state-owned enterprises, must take the lead in ensuring supply and price stability. It is necessary to promote the energy revolution and accelerate the building of an energy powerhouse.

Central Economic Work Conference: Next year's economic work must maintain stability. Macroeconomic policies must be both stable and effective.

The Central Economic Work Conference was held in Beijing from December 8 to 10. The meeting demanded that next year's economic work should maintain stability and progress at the same time. All regions and departments should take up the responsibility of stabilising the macroeconomy. All parties should actively introduce policies that are conducive to economic stability. First, the macro policy must be stable and effective. It is a must to continue to implement a proactive fiscal policy and a prudent monetary policy. A proactive fiscal policy must be able to improve efficiency with focus on precision and sustainability. It is necessary to ensure the intensity of fiscal expenditures and speed up the progress of expenditures. It is important to implement new tax and fee reduction policies; strengthen support for small, medium and micro enterprises, individual industrial and commercial households, manufacturing, risk mitigation, etc.; and appropriately advance infrastructure investments. Government agencies must persist in living a plain life. It is key to adhere to strict financial discipline. Hidden debts of local governments are strictly forbidden. A prudent monetary policy must be flexible, precise, and appropriate to maintain adequate liquidity. It is key to guide financial institutions to increase support for the real economy, especially small and micro enterprises, technological innovation, and green development. Fiscal policy and monetary policy must be coordinated and linked, and macro-control policies must be organically combined. It is key to implement the strategy of expanding domestic demand and increase the internal driving force for development.

Central Economic Work Conference: To adhere to the position that houses are used for living, not for speculation, and accelerate the development of the long-term rental housing market.

The Central Economic Work Conference was held in Beijing from December 8 to 10. The meeting called for structural policies to focus on smoothing the national economic cycle. It is key to deepen the supply-side structural reform; the focus is on smoothing the domestic cycle; and it is also important to fully integrate production, distribution, circulation, and consumption. It is necessary to enhance the core competitiveness of the manufacturing industry, launch a batch of industrial infrastructure re-engineering projects, and stimulate the emergence of a large number of "sophisticated, special and new" enterprises. It is important to accelerate the formation of a safe and efficient logistics network with internal and external connections. The digital transformation and upgrading of traditional industries shall also be accelerated. The market must adhere to the position that houses are for living, not for speculation, explore new development models, accelerate the development of the long-term rental housing market, promote the construction of affordable housing, and support the commercial housing market to better satisfy the purchase of housing, in order to guarantee the healthy development of the real estate industry.