THE country’s surprise interest rate cut could help ease the burden on hundreds of debt-ridden metals firms, but it is unlikely to spur an immediate market recovery for companies facing a winter demand slowdown and a freeze on credit.

    Analysts and traders said while there has been a psychological boost, the impact isn’t likely to be felt until next year, especially if lending restrictions remain unchanged.

    “The rate cut is not expected to have an immediate impact on the steel industry as demand slows down over the winter, and it will take time for construction projects to resume and drive up demand,” said Du Hui, analyst with Qilu Securities in Shanghai.

    Steel consumption is highly linked with the construction sector. Morgan Stanley said in a note that property sales had “yet to find a bottom amid continued tightness in credit growth.”

    Steel prices have slumped to decade-long lows this year, while global iron ore prices have nearly halved as a rapid increase in supply has outpaced Chinese demand.

    Dozens of steel mills have been facing financial problems, as declining margins hurt their ability to repay debts.

    But it has been the credit crackdown that has drained the most life from the market, and analysts say the situation won’t improve substantially until more access to finance is granted.

    “Banks are still making risk control their priority and are curbing lending to steel companies,” said Qiu Yuecheng, analyst with steel trading platform Xiben New Line E-Commerce. (SD-Agencies)