China Q1 Steel Consumption Better Than Expected

BEIJING, Apr. 24 -- According to the statistics, China's consumption of steel products in the first quarter of 2009 proved better than previous expectation.

    As calculated by Distribution Productivity Promotion Center of China Commerce, apparent consumption of steel products in the first three months totaled 141.51 million tonnes up by 6.5%YoY much better than last Q4's decline of 7.7%.

    Monthly, range of decreases in the apparent consumption gradually narrowed since the bottom low posted in October 2008; then there was an increase from December which has kept in the first 3 months this year.
The statistics said the CNY 4 trillion package has had initial effects and the worst period of steel consumption in China is going or has gone.

    1. Probing into the reasons for better Q1 consumption than expected, first goes to the recovery of quick growth in fixed asset investment. It's calculated that the social FAI came to 281.29 million tonnes in the first three months up by 28.8%YoY 4.2 percentage points higher than the comparable figure of last year. In particular, new startup of projects grew over 80%, a big trigger of steel consumptions.

    2. The end users' consumption also warmed up clearly. For example, sales volume of auto vehicles reached 1.1 million showing considerable YoY growths in 3 consecutive months; and new house transactions in Beijing, Shanghai and Shenzhen also hit record highs. As per data from the Statistics Bureau, nationwide sales area of commercial residential building increased 8.2%YoY with its value jumping 23.1%. Some other industries showed narrowed decline in production in March compared with the first two months.

    3. The steel export bottomed out. It's revealed by the Customs that China exported 1.67 million tonnes steel products in March up by 7% from February the first MoM rise since four months ago. This suggests Chinese steel export may have bottomed out, or it's at least a sign of stabilizing.

    As judged from the development trend, China's consumption of steel products is expected to improve further in the next period given emerging effects of the stimulus package and release of new favorable policies. If no accidents, an overall revival of steel consumption may happen in 2010, or in 2011 at the latest, when termination of the low-level fluctuations of steel market will be seen.

    It should be mentioned that though Q1 steel consumption has appeared nicer than previous expectation and is turning for the better, this is not indicative of a swift rebound in the demand. The "U" trend development remains viable for the steel market. It's widely estimated the market is running at the bottom of this "U" course, which may last a longer period than prefigured, citing the sustained harsh exports and other factors.

    (Source: Shanghai Securities News)