The real estate sector will not be able to support the demand for steel in China

The real estate sector is unlikely to be able to support rising steel demand in China. This was discussed at the China Forum of Raw Materials Industry, reports Kallanish.

In 2023, there may be no growth in real estate investments and new projects on an annual basis, and the prospect of stable sales in the sector remains unclear.

According to the Chinese National Bureau of Statistics, in the first quarter of 2023, real estate sales by area in the country fell by 1.8% y/y. However, the figures improve from a 24.3% drop in sales in 2022. However, data from early April for 50 key cities indicate that this momentum is currently fading, however, analysts attribute this to some delays on the part of buyers. Xu Yuejing, deputy research director of China Index Academy, predicts that real estate sales will grow by 1.2% y/y in 2023 – up to 1.38 billion square meters, and by 2025 the average annual level will be 1.2 billion square meters.

Analysts are also pessimistic about forecasts of the volume of new construction starts, which will affect the demand for steel in this sector. In January-March 2023, this indicator fell by 19.2% y/y.

Zhou Jinlei from Nanjing Iron&Steel believes that steel demand in China will fall by 1% this year compared to 2022, and steel prices in the country may rise again to high levels in November-December 2023.

As GMK Center reported earlier, China in January-March 2023 increased production of steel by 6.1% compared to the same period in 2022 – up to 261.56 million tons. In March, Chinese steelmakers produced 95.73 million tons of steel, which is 6.9% more than in March 2022. China’s steel production is expected to face more pressure in the second half of 2023. here are rumors in the market that production will be limited to last year’s level in order to formulate and implement a policy to reduce carbon emissions.

Also, China intends to publish a plan that requires local steel producers to ensure that the volume of production in the current year does not exceed the level of 2022 (1.018 billion tons). The move, expected by the end of April, reflects officials’ concerns about weak demand for steel, but the sources said it does not require drastic cuts of specific percentages.