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China's infrastructure push seen set to boost steel demand further in H2

Singapore — China's efforts to approve new infrastructure projects and accelerate construction remained strong in July which, combined with fiscal stimulus measures in recent months, looks set to help steel demand from the infrastructure sector strengthen further in the second half of 2020.

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China approved 14 airport projects with a total investment of Yuan 105.66 billion ($15.3 billion) over January-July, already 13% higher than the value of total approvals in 2019, according to S&P Global Platts analysis.

In addition, 22 railway and urban rail transport projects were approved over the seven-month period, with 16 more expected to be approved soon. The length of these projects combined is 5,801 km (3,604.6 miles), almost the same as the total length approved last year, Platts analysis showed.

Work on most of these projects is expected to start in the second half of 2020. Steel consumption from these newly approved projects, and from the construction of major rail and airport projects approved over 2016-2019, will reach about 23 million mt in 2020, up by 24% from 2019, according to Platts calculations.

However, these are classified as China's major infrastructure projects, which have been receiving support from central or local governments and state-owned companies.

China's overall infrastructure construction will not be as strong as these projects, as smaller projects have had less support from governments and state-owned companies, while the private sector still lacks appetite for investment.

Some market sources said full year investment for the infrastructure sector overall was likely to be as high as 10% year on year in 2020, up from 3.8% in 2019, driven by the construction of major infrastructure projects.

Single-month infrastructure investment in H2 was therefore likely to rise at double-digit rates, boosting steel demand from infrastructure construction to an even higher level in H2 than in H1, market sources said.