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China fast-tracks infrastructure investment, will support steel demand

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Update time : 2020-05-20 19:24:18
Singapore — China has picked up the pace of new infrastructure project approvals in 2020, with more support expected to be announced during the "two meetings" starting in Beijing this week, helping to drive steel demand.

Over January-April, China approved nine airport projects with a total investment of Yuan 100.16 billion ($14.1 billion), equivalent to 55% of total approvals in 2019, according to S&P Global Platts analysis.

Further, 13 railway and urban rail transport projects were approved over the same period, with eight more expected to be approved soon. The length of these projects combined is 3,641 km, equivalent to 61% of the total length approved last year.

Work will start on most of the projects this year. Platts estimates the projects will require 19.56 million mt of steel, already 63% of the steel used by similar projects approved in 2019.

The boost to new airport, railway and urban rail transport projects is a sign of China moving back to traditional infrastructure construction in a bid to cushion the slowing economy and support. China's "new" infrastructure projects are focused on technology and communication networks and are less people and commodity intensive.

China has also been boosting its fiscal support to speed up infrastructure construction, through measures such as raising the local government special bonds quota, and pushing forward the establishment of real estate investment trust funds, or REITs, in the infrastructure sector.

Local government special bonds are expected to reach Yuan 3 trillion-3.5 trillion in 2020, up from Yuan 2.15 trillion in 2019, some steel market sources said. The special bonds are forbidden to be spent on property related projects in 2020, whereas 64% of the special bonds issued in 2019 found their way into property and thus failed to boost infrastructure growth.

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