Stimulus impact on Chinese steel demand likely to be modest: UBS By Investing.com

Investing/com — The impact of China’s recent stimulus measures on steel demand is expected to be modest, despite the potential for initial market excitement, according to analysts at UBS.

While these announcements caused prices to spike, rising nearly 20% at the end of September, the long-term effect on steel demand is likely to be less than some might have hoped.

The measures, which include interest rate cuts, a reduction in mortgage payments and increased funding for social housing, are aimed primarily at supporting consumers rather than a substantial boost to property and infrastructure investment.

UBS analysts report that China’s real estate sector continues to struggle with overstocking and falling prices, while infrastructure projects are hampered by local government debt and a lack of economically viable new initiatives.

Consequently, while these stimulus efforts may help stabilize the economy, they are unlikely to trigger a major increase in steel demand similar to the large-scale economic interventions seen in 2009 or 2015.

Iron ore supply remained strong, with shipments from key suppliers such as Australia and Brazil rising in 2024. However, Chinese steel production has been relatively weak this year and steel stocks at Chinese ports have risen.

While there was a seasonal pick-up in output towards the end of September, the broader demand outlook remains uncertain.

UBS expects the iron ore market to enter a moderate surplus in 2025, with prices stabilizing around $100 a tonne.