Chinese Real Estate Indicators Continue to Drift Lower in April
Chinese real estate indicators
Chinese real estate indicators continued to drift lower in April. The construction sector accounts for more than half of China’s steel demand, using steel products like rebars, decks, and joists. Nucor (NUE), Commercial Metals Company (CMC), and Gerdau S.A. (GGB) are leading rebar suppliers in the United States. Gerdau forms 0.98% of the iShares MSCI Brazil Capped ETF (EWZ).
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Land area purchased
Purchasing land is the first step in the construction of any building. The above chart shows the land area purchased by Chinese real estate development enterprises. The data are released on a monthly basis by the National Bureau of Statistics of China. In the first four months of the current year, real estate development enterprises purchased 54.69 million square meters of land. This represents a year-over-year decline of 32.7%.
The land area that real estate developers purchased is a leading indicator of construction activity. Since the land area purchased for future development has come down, the construction industry in China (MCHI) seems headed for a bigger slowdown.
Real estate is the key driver of economic activity. It supports industries like steel and cement. It also generates several direct and indirect jobs. Real estate activity is a key indicator of Chinese steel demand.
Negative for steel industry
The decline in China’s construction activity is negative for the global steel industry. A slowdown in domestic demand is the key reason Chinese steel products are flooding international markets. China has resorted to three rate cuts in the last six months, but economic activity has still failed to improve materially.
There are several other indicators of the Chinese real estate sector that investors can track. We’ll discuss these in detail in the next part.