China’s steel demand outlook
China (FXI) is the world’s largest steel consumer. The country’s steel demand grew steadily in the past few years due to stimulus-fueled growth in the construction and automotive sectors. Both of these sectors have shown signs of moderation in the last few months.
Real estate indicators
The land area purchased by Chinese real estate developers grew at a slower pace in the first ten months compared to the first nine months. China’s real estate investment grew 9.7% YoY (year-over-year) in the first ten months of the year. The growth rates have fallen to a ten-month low. According to Reuters’ calculation, “Property investment, which mainly focuses on residential but also includes commercial and office space, grew 7.7 percent in October from a year earlier, slowing from an 8.9 percent expansion in September.” Property sales have also continued to soften. The sales volumes fell 4.7% YoY in the first ten months. The data showed an additional deterioration from September.
China’s automotive sector has also been witnessing a slowdown. Passenger car sales have fallen by double digits for two consecutive months. Passenger car sales have fallen on a year-to-date basis in the first ten months of the year. A slowdown in China’s steel demand is a risk for US steel mills like U.S. Steel Corporation (X), AK Steel (AKS), and Nucor (NUE). Slower demand tends to pressure global steel prices (CLF).
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