China’s measures to arrest its housing crisis are no panacea for the steel markets that rely on real estate for demand.
While property accounts for almost 40% of Chinese steel consumption, the government’s focus on reviving home buying by cutting interest rates and loosening mortgage rules will take time to translate into the new housing starts that use the most steel, according to a note from Mysteel.
Moreover, the stimulus is being targeted at the biggest conurbations, although first-tier cities like Beijing and Shanghai account for less than 3% of commercial housing sales, the research firm said.
With buyers’ leverage ratios high and sentiment soured by the protracted crisis, the government’s efforts so far may result in only a limited boost to steel demand, suggesting further policy support will be required, Mysteel said.
Read More: Housing Aid Is No Quick Fix for Deepening Gloom
Looking beyond the property market, the picture for prices is a little brighter. Construction activity usually lifts in the autumn and local governments have accelerated borrowing for infrastructure investment. Steelmakers have also cut production, with volumes recorded by the China Iron and Steel Association dropping in late August to their lowest in seven months as mills eye Beijing’s cap on annual output.
The Week’s Diary
(All times Beijing unless noted.)
Monday, Sept. 11
- China to release August aggregate financing & money supply by Sept. 15
- China Silicon Industry Conference in Baotou, Inner Mongolia, day 1
Tuesday, Sept. 12
- China’s monthly CASDE crop supply-demand report
- China Silicon Industry Conference in Baotou, Inner Mongolia, day 2
Wednesday, Sept. 13
- CCTD’s weekly online briefing on Chinese coal, 15:00
- China Silicon Industry Conference in Baotou, Inner Mongolia, day 3
Thursday, Sept. 14
- Nothing major scheduled
Friday, Sept. 15
- China sets monthly medium-term lending rate, 09:20
- China’s new home prices for August, 09:30
- China industrial output for August, including steel & aluminum; coal, gas & power generation; and crude oil & refining. 10:00
- Retail sales, fixed assets investment, property investment and residential sales, jobless rate
- China weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~15:30
On the Wire
China’s deflationary pressures eased slightly and data expected this week may show a pickup in credit demand, adding to a recent trickle of signs the nation’s economy is stabilizing.
August’s activity data will probably show more signs of Chinese production bottoming, but services growth will likely slow further, according to Bloomberg Economics.