Chinese steel demand
In this final part of our series, we’ll look at some indicators of Chinese steel demand. The construction sector is the largest steel consumer in China. Although we don’t get many indicators of China’s construction activity in the first two months of the year, some of the indicators show moderation in China’s real estate sector.
New home prices
For instance, new home prices rose in 44 of 70 cities in February, compared to 52 cities in January, according to the National Bureau of Statistics of China. The Chinese government has been trying to curb speculation in property prices. Lower growth in house prices could be due to the efforts of the Chinese government.
In February, China’s car sales fell 11.1% year-over-year (or YoY) to 1.7 million units. Although the fall looks massive and ended an eight-month uptrend, it’s prudent to look at the consolidated data for the first two months. The Chinese New Year holiday was in February this year, while it had occurred in January in 2017.
China’s vehicle sales for the first two months of 2018 totaled 4.5 million, which is 1.7% higher than the same period in 2017. Even looking at the consolidated data, China’s car sales growth rate is running at a slower pace than the last year.
Meanwhile, as China’s demand growth has slowed, we have seen a pile-up of steel inventories. The increase in inventory is especially prominent in rebar, which is used in the construction sector. In the US market, Nucor (NUE) and Commercial Metals Company (CMC) are the leading rebar suppliers.
See US Steel Stocks Look Weak Despite Tariffs to see what the slowdown in China’s steel demand growth could mean for steelmakers like U.S. Steel Corporation (X), AK Steel (AKS), and ArcelorMittal (MT).