China has again reaffirmed its railway investment target of CNY 800 billion ($130 billion) in 2015, level from 2014. Analysts’ estimates on actual railway infrastructure investment, and therefore steel demand from the sector, vary however. With planning underway for the thirteenth five-year plan, railway infrastructure is likely to have to pick up some of the slack from China’s slower construction steel demand growth, Kallanish notes.

China’s investment in its railways has increased steadily over the twelfth five-year plan (2011-2015) from CNY 580 billion in 2011 to CNY 800 billion in 2014. This year’s target is CNY 800 billion but some analysts point out that spending normally exceeds targets set at the start of the year. Railway investment is also used as a tool to stimulate economic activity and so investment tends to increase if Beijing feels the need to boost growth. This would suggest steel demand of 27 million tonnes or more.

On the other hand, the China Iron and Steel Association (CISA) has noted that there are fewer specific projects announced so far for this year. They believe actual spending on railway infrastructure will be just around CNY 650 billion in 2015. This gives an estimated steel demand figure of around 21mt.

A report in the 21st Century Business Herald notes that planning is currently underway for the next five-year plan and suggests a tentative spending target of CNY 2.8 trillion is being considered for 2016-2020. Although this would be a sharp fall from CNY 80 billion/year, it is actually the same target as set at the start of the last five-year plan. In the end that CNY 2.8 trillion target turned into an estimated CNY 3.47 trillion in actual spending.

This also implies that, in order to meet the target, spending will fall over the next five years. This decline is likely to be offset significantly by the use of railway investment to maintain economic growth figures. However, what seems certain is that the growth in investment seen over the last five years cannot be repeated, Kallanish notes.