Chinese press reports claim some silver linings appearing.
If more money circulating in the Chinese economy can help basic materials markets, some of the early 2009 figures from China are sending a positive signal.
According to the China Daily Web site, Chinese banks issued more than $230 billion in new loans in January of 2009. China’s central bank says this amount represents a 101 percent increase over January 2008 lending. “The massive jump in lending is equal to about one-third of the loans issued in 2008, a year that began on a generally tight credit line,” reports China Daily.
The central government’s $586 billion stimulus package was pointed to as a major factor in the increased activity by analysts contacted by the media in China, with some of the lending tied to major infrastructure projects.
China Daily reports that China’s largest lender, the Industrial and Commercial Bank of China, has stated that 60 percent of its loans in January went to government-backed projects such as electrical grids, railways and nuclear power plants.
Other lending is being attributed to pent-up demand in the private sector. Restrictions in 2008 severely curtailed cash flow for many companies that are now striving to renew their prior lines
One analyst contacted by China Daily predicted the renewed activity will be apparent in the wider economy by the second half of 2009.
Meanwhile, the infrastructure projects are the likely source behind a more direct measure of basic materials demand. Steel output is back on the rise in China.
In what a China Daily reporter terms “A blind rush back to production by Chinese steel mills,” steel output has soared back up above the record-high 2008 average.
At least one source contacted by the media outlet was not convinced the output surge is wise. An officer of the China Iron and Steel Association warned that genuine demand does not yet warrant the increased output, and that an oversupply situation for finished steel could be an unintended consequence.
On the nonferrous side, the TopRecycle news agency (www.TopRecycle.net) reports that copper scrap demand and supply remains muted overall, with very little new demand evident in the market despite elements of the stimulus package that should, in theory, call for more copper wire and cable.