Posted on 25 Mar 2025
Chinese steel prices are languishing, despite signs of resilience in the wider economy and the approach of peak demand season in the building industry.
The disconnect between better economic data, and the gloomy reality linked to the property market, suggests another tough year ahead for the nation’s steelmakers – and additional impetus for the government to force cuts on an industry bloated by its reliance on real estate spending that is not coming back.
The end of the Chinese New Year holiday and warmer spring weather usually drives increased building activity in China’s highly seasonal economy. But Shanghai futures for reinforcement bar, used in construction, hit a six-month low last week and were more than 10 per cent below year-ago levels.
The trigger was yet another collapse in a key Chinese housing metric, this time a 30 per cent plunge in new builds over January and February, according to Lawrence Zhang, an analyst at Wood Mackenzie. That’s the most steel-intensive part of the market and it was the worst start to a year in over two decades.
Look beyond the yearslong property crisis, though, and the economy’s prospects look brighter, including data that normally speak to steel demand. Fixed-asset investment accelerated over the two months, lifted by more state spending. The construction purchasing managers’ index rebounded into expansion in February.
More broadly, the government has signalled its intention to meet its ambitious 5 per cent growth target by dialling up the budget deficit for the year to a record. More spending is promised at the local government level via bonds that are typically used for infrastructure, and that debt is being issued at a faster pace than usual.
Source:The Business Times
