ICRA: Evergrande financial stress likely to shorten steel price upcycle

Thursday, 11 November 2021 12:22:23 (GMT+3)   |   Kolkata
       

The financial stress resulting from the difficulties of Chinese real estate giant Evergrande China is likely to shorten the ‘ongoing upcycle going forward’ Indian rating agency ICRA said in a note on Thursday, November 11.

“With the Chinese property sector accounting for around 15 percent of global steel demand, the Evergrande saga may potentially shorten the length of the ongoing steel upcycle going forward,” ICRA said. China accounts for around 55 percent of global steel demand.

The ongoing readjustment away from a property-driven model of growth in China is likely to have an adverse impact on the steel industry for an extended period, the ICRA note said.

Property giant Evergrande formerly known as Hengda Group located in Guangzhou, southern China, sought a repayment extension for a trust loan in early September, and media reports said that Evergrande would suspend interest payments due on loans to two banks.

As demand dries up in the domestic market in China, there is a steadily rising trend seen in Chinese steel exports, which suggests that competition in the export markets between Indian and Chinese mills could intensify going forward. China has emerged as the single largest importer of steel from India, supported by the strong demand undercurrents flowing through key steel-consuming sectors, ICRA pointed out.

“The rising trend in Chinese steel exports, which have increased by 31.3 percent year on year during the first half of the current calendar year, suggests that competition in the export markets between Indian and Chinese mills could intensify going forward,” the ICRA note said.


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