Macro economic data in China in January indicated an overall slow-down, with that in the major steel-consuming sectors of housing, railway, machinery, and automotive being especially hit.

In the railway sector, the infrastructure construction investment and fixed asset investment dropped by 76% and 70% respectively y-o-y to the lowest level since 2009.

Output of automobiles in January declined 23.2% month-on-month and 27.5% year-on-year. Such slow-downs can hardly be corrected in the short term.

Heeding this slower paces of economic growth, the central bank decided in late February to cut the required reserve rate by another 0.5%, effective as of 24 February. This is considered a signal to the Chinese government to loosen its hands on macro control. The extra money release to the market would be translated into purchases for steel plants, but it will take several months for down-stream demand to revive.

Source: China Metals e-mail