On October 21, the National Interbank Lending Center authorized by the People's Bank of China (PBOC) announced the reduction of the one-year loan prime rate (LPR) to 3.1 percent, while cutting the LPR for five years or more to 3.6 percent, both down 25 basis points from the previous month.
This is the third LPR adjustment in 2024. Early in February this year, the LPR for five years or more was cut by 25 basis points, while in July the LPRs for one year and for five years were cut by 10 basis points.
Wen Bin, chief economist at China Minsheng Bank, stated that the decrease in the LPR will lead to a decline in corporate and residential lending rates, which will promote a decline in social financing costs and expand aggregate macroeconomic demand, support a reasonable rebound in commodity prices and drive steady growth in the real economy.
The cut in lending rates had been expected by market sources, unlike the cut in July, and forms part of the Chinese government’s recent stimulus measures aimed at achieving the goal of five percent GDP growth this year.
However, the impact on the steel market has been limited. “It seems that cash support for the market is occurring in line with the authorities’ intentions. But steel futures still showed a negative trend [on Tuesday], though not much, with some buying support in the afternoon. Physical steel sales are following the paper market very closely,” a Chinese trader said. An official at one of the Chinese steel mills has commented to SteelOrbis that steel demand conditions have not changed much and that the steel market mood is expected to range from stable to cautiously negative in the coming month.