China’s old economy spurs sales boom for diggers, steel

Bloomberg

Sales of diggers at a five year high. The price of rebar, a steel product used to reinforce concrete, back at 2012 levels. Crude steel output surging to a record. China’s economy may be slowing down but the nation’s old economy is still booming.
The government’s effort to keep Asia’s biggest economy on track for its 6.5-percent growth target has sustained a flurry of spending on housing and infrastructure that started in 2016, and is poised to extend well into 2017. It’s also got some classic indicators of the construction economy looking very lively.
Rebar, ribbed rods of steel used to strengthen concrete structures, is soaring. The average price of rebar across China rose to 4,048 yuan ($522) a ton, up 21 percent so far this year after a 67 percent gain in 2016, according to data from consultancy Beijing Antaike Information Development Co. The price has more than doubled since late-2015, after China’s stimulus measures eased a global steel crisis.
Another indicator is booming sales of heavy vehicles – diggers, bulldozers, loaders – used on building sites. Some economists are closely watching excavator sales. Mo Ji, chief economist for Asia ex-Japan at Amundi Asset Management in Hong Kong says buoyant sales bode well for capital investment deep into 2017.
Excavator sales in the first four months of the year rose to the highest since 2012. A bulldozer binge sent sales to the highest since 2014. Usage of these machines is rising, too. Japan’s Komatsu Ltd, the world’s second-biggest supplier of such equipment, said its China-based vehicles put in an average of 154 hours of use in April, 14 percent higher than a year earlier and the highest in at least 12 months.
Steel demand in the world’s biggest consumer and producer has held to robust growth as the old economy revs up, reaching a record in April as mills fired up their furnaces to feed higher prices. Exports of steel in the first four months of the year have dropped by a quarter, even as production ballooned, in a further sign of healthy domestic demand. Steel consumption will expand by about 3 percent this year, according to analysts from Deutsche Bank AG.
To be sure, there are already signs of softening as the government signals that the lending largesse of the past two years is coming to an end. A promise to crack down on risk in the financial system by reining in excessive credit sent jitters through markets earlier this month. But although imports, industrial production and fixed asset investment all slowed in April, the overall credit tightening appears to have been modest, so far.