One thing that stuck out of China’s Two Sessions is that Beijing policymakers had stopped setting GDP growth target but instead using various macroeconomic goals.
Thus, no GDP growth numbers of 6% was mentioned in the Two Sessions as per previous session that we are used to.
Instead, quantitative macroeconomic goals were set such as creation of over 9 million new urban jobs with registered urban unemployment rate of around 5.5%.
Silent over infrastructure sectors
China chose to focus on stable recovery strategy for its economy and Pei Hao, senior researcher of Freight Investor Services (FIS) noted that there were little mentions over infrastructure sectors.
So far, the Chinese government had pledged to increase 100 billion yuan more for the railroad infrastructure for 2020, as compared to previous year.
In term of housing, there were less market speculations and there was potential decrease on low-rent and rundown houses.
Low steel demand for rainy June
Construction steels daily consumption still traded above 220,000- 230,000 tonnes level seen last week.
However, the statistics had yet to reflect the flood situation in southern China region, at the Guangdong province, where rainy season is expected to last for a few weeks during June.
Thus, steel prices may edge lower in June, given the lower steel demand in southern China due to rainy season. In the meantime, the current high blast furnace utilization rate may result oversupply of steel products in coming month of June.
Tighter Brazilian supply ahead
Market participants remained concerns over Brazilian iron ore exports amid soaring COVID-19 outbreak cases in the country.
However, the country’s largest miner, Vale did not make any adjustment to its annual output or sales target related to the coronavirus pandemic.
Going forward, Pei Hao expects the uncertainty in Brazilian iron ore supply to move iron ore prices in a larger volatility range in following a series of workflows:
Iron ore delivery increase —> Steel mills inventory slight up —> Port inventory up —> Port physical iron ore and DCE iron ore correction —> Import profit squeezed —> Seaborne iron ore and SGX iron ore correction deeper.