Chinese steel futures roared higher on Monday after billet prices gained steadily over the weekend and continued on Monday. Although spot market demand has remained subdued, the market expects higher lending to drive demand growth in the coming months, Kallanish notes.

On the Shanghai Futures Exchange the October rebar contract closed at CNY 4,345/tonne ($634/t), CNY 145/t higher than on Friday and a six-year high. The same contract for hot rolled coil  meanwhile closed up CNY 102/t at CNY 4,273/t. Tangshan billet prices also leapt higher, gaining CNY 50/t to CNY 4,000/t on Monday, the highest level since December. Billet prices had already been hiked CNY 40/t over the weekend.

The Chinese market is waiting on key economic data to be released Tuesday. The number that has caused the most speculation however is credit growth. China’s central banking regulator has quoted preliminary statistics, saying that new CNY loans were CNY 1.45 trillion, a CNY 623 billion increase from July 2017. New Infrastructure loans meanwhile were up CNY 46.9 billion from June to CNY 172.4 billion in July.

Faster credit expansion is being read as confirmation that Beijing is loosening lending to support the economy during the current slowdown. Non-bank lending however has been reported to be weak. Overall, the increase in financing may be more modest than the official data suggest.