MOF's tightening scrutiny on PPP may hurt steel demand
Source: Mysteel
May 02, 2018 10:42
The proposed closer scrutiny by China’s Ministry of Finance (MOF) over Public-Private Partnership (PPP) projects may risk slackening steel demand in some regions of the country, market sources shared on April 28.
In a recent notice dated April 24, MOF named a total of 173 PPP projects being identified with problems such as little progress or abnormal conducts during the latest round of checks, A total of 30 have since been removed from the country’s PPP projects list and the others have been requested to modify in accordance with related rules and regulations by the end of June.
The latest wipeout is the fruit of MOF’s request for the provincial finance bureaus to review their local PPP project lists on their own and submit the report by March 31, Mysteel understands.
“The initiatives of PPP projects are good and meant to boost local economies, but China’s PPP is still at the preliminary stage and the structure, thus, is incomplete and inadequate,” a Shanghai-based industrial source commented.
PPP has been a hot topic in the past few years as Beijing’s one of the attempts to grow local economies and allow private investors into city development, “which has indeed attracted a lot of investment interests but at the same time has triggered the concern of ever-rising debts at the local authorities, so Beijing is now reining in on it,” she added.
Enhanced surveillance on PPP projects, however, is expected to lead to a suspension or termination of some projects and thus less demand for steel in the affected areas. Northwest China’s Xinjiang Uygur Autonomous Region with the most number of PPP projects abandoned, has felt keenly the affection, according to market sources.
“The adverse impact on our business is phenomenal,” a Xinjiang-based steel trader told Mysteel, adding, “around 80% of our steel demand is evaporated with the stoppage of the PPP projects, and we cannot direct our steel to other regions nearby because of too high transportation cost.”
Mysteel’s HRB 400 20mm dia rebar benchmark price in Urumqi, Xinjiang’s capital, thus, was Yuan 40/t lower on month at Yuan 3,910/t as of April 28, which was also Yuan 195/t lower than the national average for same dimensions last Saturday, a make-up working day in China prior to the May Day holiday.
By the end of March, 1,160 projects with Yuan 1.2 trillion ($190 billion) in value had been removed from China’s PPP project list since November 16, 2017 when MOF urged provincial financial bureaus to review their respective lists while 7,420 projects with Yuan 11.5 trillion in total investment have survived, according to the latest release by the China Public Private Partnership Center, MOF’s department in charge of PPP projects, on April 28.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited Hongmei Li, li.hongmei@mysteel.com
You May Also Like
Japan’s flat steel stocks down on production cuts
Jun 03, 2020 12:00
NBS: China's H1 FAI grows at a slightly slower 6%
Jul 16, 2018 13:48
New US tariffs alert, not alarm, China's steel market
Jul 12, 2018 20:47
WEEKLY: Steel stocks thin as sellers start discounting
Jul 09, 2018 08:41
Yuan devaluation yet to pressure Taiwan steel exports
Jul 06, 2018 09:33