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Chinese Steel Demand Indicators Improve: For How Long?

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Chinese steel demand

Since China is the world’s largest steel consumer, it’s important for investors in steel companies (XLB) such as U.S. Steel (X), AK Steel (AKS), Nucor (NUE), and ArcelorMittal (MT) to keep track of Chinese steel demand indicators.

Notably, one of the factors that helped the rally in metals and mining shares this year has been the improvement in China’s economic indicators. In this part, we’ll see how China’s steel demand indicators shaped up last month. We’ll explore what a Trump presidency could mean for China’s steel demand.

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Real estate indicators

  • The total floor area (in square meters) under construction by Chinese real estate development enterprises rose 3.3% YoY (year-over-year) in the first ten months of 2016. The growth rate rose by 0.1 percentage points—compared to the first nine months of the year.
  • In the first ten months of 2016, building sales rose 26.8% YoY in China. However, the growth rate fell by 0.1 percentage points—compared to the first nine months of the year. It was the sixth consecutive month that the growth rates fell on a monthly basis.
  • China’s new construction starts rose 8.1% YoY in the first ten months of 2016. The growth rate rose by 1.3 percentage points—compared to the first nine months of the year.

Overall, China’s real estate investment data were better-than-expected in October. We also saw a modest recovery in China’s real estate climate index in the month, as you can see in the above graph. However, we should note that some of the Chinese cities tightened home ownership rules in a bid to cool down the overheating in the property market. Also, the country’s steel demand could come under pressure if Trump is tough on imports from China. We’ll discuss this more in the next part.

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