China's economic planning and the impact on companies

After China's state planner announced a roadmap to stimulate the economy, shares of metal companies such as NMDC, NALCO, Tata Steel and JSW Steel fell 3-5% on 8 October. Investors were disappointed that expectations of further stimulus were not met. The sharp decrease in SGX iron ore prices also negatively affected producers of raw materials used in steelmaking.

China's National Development and Reform Commission expressed confidence in achieving this year's economic targets, but did not provide significant details on fiscal policy. This, combined with depressed consumer spending and a downturn in the property sector, adds to the difficulty of the growth target. In addition, trade tensions over new growth drivers such as electric vehicle exports also add to the challenges.

Markets have seen a revival with producers such as Baosteel increasing the new reference price, but smaller producers are trying to maintain their current price levels. The export market is moving with a wait-and-see approach following the recent price hikes. Feedstock prices are around USD 105 with decreasing port stocks. Production capacity is expected to increase in October. The market is trying to stabilise as it digests the policy outcomes and October demand is hoped to stimulate the economy.