The ferrous complex launched on August 24, 2021 as the flushed out bottom of last week turned higher with gusto as expected. Spot and paper boomed. Steel has still not updated:
From a contact, the action was all speculation:
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09:55:30 The credit meeting. PBOC Governor Yi Gang hosted a meeting yesterday regarding monetary and credit trend analysis. The central bank acknowledged that ‘the recovery of domestic economy is still unstable and uneven.’ Hence PBOC pledged to ‘strengthen credit support to real economy, especially SMEs,’ and to ‘increase the stability of credit growth.’ The anchor of policy remains ‘keeping monetary and credit growth in line with nominal GDP growth.’ The areas of credit support include technological innovation, green development, SMEs, personal business owners, rural business, etc
09:55:52 we have seen large western trading house the main buyer today
09:56:26 but, volume has been fairly light so moving higher on thin volume
Here’s the PBoC release from Yuan Talks:
Chinese central bank said in a recent meeting that “more efforts are needed to keep steady credit growth,” which, many believe, indicates the authority is concerned about weak credit demand as economic recovery loses momentum and is likely to take actions to loose credit condition.
“As the global Covid-19 pandemic continues to evolve, China’s external environment is becoming increasingly severe and complex and the domestic economic recovery is still not solid and uneven,” according to a statement released by the People’s Bank of China (PBOC) after a Monday meeting about China’s economic situation.
The prudent monetary policy should be made flexible, targeted and appropriate and the authority will work to make cross-cyclical adjustments, the central bank reiterated. In particular, it noted that “more efforts are needed keep steady growth of credit.”
Yi Gang, Governor of the PBOC, emphasized that the central bank will “step up credit support to the real economy, in particular medium and small-sized companies, and increase the stability of overall credit growth.” He added that the PBOC will “match the credit work in the second half of this year and the first half of next year,” which “is a requirement by the Politburo about matching the macro economic policies for this year and next year.”
The PBOC statement was widely interpreted as a signal that the central bank will take measures to loose credit condition to boost economic growth.
“The PBOC is urging commercial banks to step up lending, smoothen the pace of lending and effectively support the real economy as soon as possible, instead of resorting to banks’ traditional pace of reserving projects in the fourth quarter each year in order to make a strong start at the start of next year,” said Zhong Linnan, economist at GF Securities.
…Yi stressed that the PBOC will push real lending rates lower, steadily bring down the overall borrowing costs for small and micro businesses, help banks’ capital replenishments to strengthen their lending capability and ask lenders to “adjust lending structure, step up support for key areas and weak links and make more funding flow to technological innovation, green development, small and micro business, individual business and new-type agriculture businesses.”
This is precisely the kind of incremental credit easing that will achieve little. Yes, it shows that there is ongoing concern about slowing growth. But that’s not terribly useful unless or until there is enough credit growth to boost it. Especially so in the commodity-intensive areas of property and infrastructure which remain under heavy pressure.
There is nothing here to boost iron ore demand. On the contrary, if the PBoC succeeds in boosting SME, green development, agriculture and technology lending then old economy output will fall even more.
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