“The China Connection,” a program dedicated to analyzing China’s economic landscape, airs Monday through Friday from 10:00 to 11:00 Singapore/Hong Kong time and 04:00 to 05:00 Central European Time. The purpose of the show is to bring you insights on important developments from both the public and private sector. Today, the steel sector is experiencing substantial pain as it relates to demand.
Vivek Dhar, a mining and energy economist at CBA, emphasized that China’s steel sector is facing a fundamental demand problem. Through all these difficulties, he emphasized that the country of 100 million people is firmly on the path to structural reforms focused on balancing their priorities. These reforms will help promote greater efficiency and sustainability in the steel industry.
Dhar underscored the most important takeaway — this is the focus of national consensus within China. The country is clearly aware of an urgent need to address overcapacity in the steel sector. Policymakers and industry leaders have come together around this goal. This indicates their seriousness to make big, systemic changes to an industry that has for years been characterized by overproduction. These actions are intended to bring some stability to the market and provide a better demand environment overall over the longer term.
Dhar underscored that China’s action is probably to come soonest from its own neighbors. Because of the subsidy and currency manipulation racket that has distorted Chinese trade, they can begin anti-dumping investigations. This development would mark a major and positive shift in direction for trade relations in the region. Analysts expect that should China be investigated, it will use workarounds to avoid being found in violation as it looks to avoid any economic blowback from these moves.
Additionally, interest in China’s Yarlung Tsangpo mega dam project has stoked over-enthusiasm in markets. As exciting as this big infrastructure push is, in terms of expanding production and facilitating economic development, analysts say to be careful. They all underscore the need to look past fad-like speculative trends and focus on underlying economic fundamentals.