By Nick Gilbert
Recently, China has announced a stimulus package to promote the growth of the steel industry and the country intends to enhance investment in infrastructure programs. Funding will be offered to the home appliance sector to create energy-efficient products. In addition, funds are being offered to construct two large steel plants in the south of China.
MEPS - STEEL PURCHASING PRICE INDEXES
The main aim of the package is to expand infrastructure investment, which will encourage manufacturer of long steel products, such as structural sections, wire rods and reinforcing bars. The industry was concerned that a decrease in sales in the real estate market will cause a decline in the production of long steel products. However, such concerns are yet to be proved. In the 1Q of 2012, the output of steel products increased by 8%. Subsidies for highly efficient home appliances must increase the usage of flat steel products in the upcoming years. This sector was showing a steady increasing demand and output, particularly from zinc coated and cold rolled sheet used in the automotive sector. The local consumption of the flat steel products could improve later in 2012.
In 2012, steel costs for the construction and home appliance industries will be considerably lower than 2011. The MEPS – Construction Sector Steel Purchasing Price Index was 145.5 in 2011 and the value is anticipated to decrease to 131.5 this year, a reduction of approximately 10%. In 2012, the building and construction sector is expected to save a minimum of RMB 110 billion from lower steel prices, according to MEPS evaluation. Similarly, the MEPS – Household Appliance Steel Purchasing Price Index averaged 95.5 in 2011 and is projected to decline to 85.0 in 2012.