Iron ore futures inched up on the day session, despite market concerns over stringent covid lockdown measures that hurt steel demand.
The futures of Dalian Commodity Exchange (DCE) for May delivery rose by 0.43% day-on-day or up RMB 3.50 to RMB 822.50/mt, during the day trading session on Wednesday.
The rebar futures also increased by 1.07% or up RMB 53 day-on-day to RMB 4,985/mt, during the day trading session.
Expectation of more fiscal policies from Chinese policymakers
Some trade participants linked the rally to the expectation of some form of fiscal policies to be introduced by the Beijing policymakers soon.
As the Chinese government was literally sitting on a hoard load of cash, as government deposits racked up to a combined 1.17 trillion yuan or $184 billion by January-February 2022, according to Bloomberg.
The cash stockpile was at the highest level over two decades since 2000 and may suggest that the Chinese government had plenty of room to push up further fiscal stimulus probably from March onward.
So far, the Chinese general budget spending rose 7% year-on-year during the January-February 2022, lowered than the 10.5% growth in general fiscal income in the period, according to the country’s Ministry of Finance.
More construction sites suspended due to pandemic restrictions
Despite the optimism over fiscal policies, Chinese steel demand were weighed down by the slowing property market, due to the pandemic restrictions on traffic and gathering across 28 Chinese provinces.
Many construction sites were heard to have suspended to comply with stringent social restriction regulations, while manufacturers were also affected by the slow output due to personnel quarantining and disruption in the logistics of raw materials.
Therefore, the sales of flat and long steel products had slowed since by mid-March, in view of the lacklustre demand, though some market participants expected some easing of the traffic and gathering restriction by mid or late April.