CHINA: All steel-using sectors show signs of weakening
The depression in the property market that continued into 2023 is weighing on the economy, leading to an unexpected slowing of the Chinese economy. Falling housing sales have led to financial troubles for major real estate developers, generating concerns about the health of the Chinese economy. However, the situation is expected to stabilise in the latter part of 2023 as the Chinese government has taken some measures to stabilise the economy since July.
Almost all steel using sectors have shown signs of weakening since the second quarter. Key real estate indicators like land sales, housing sales and new construction starts continued to fall in 2023. The decline in new starts in 2021-2022 has suppressed construction activities and will continue to suppress steel demand in 2024.
On the other hand, the growth momentum of infrastructure investment continued in 2023 thanks to the government’s efforts to boost construction. The government may kick off some additional infrastructure projects. As a result, infrastructure investment in both 2023 and 2024 is expected to remain moderately positive.
Manufacturing growth momentum also weakened, but maintained moderate growth in 2023, with positive growth in auto production and strong growth in home appliances. The growth momentum in manufacturing may weaken further due to deteriorating external markets.
It is expected that steel demand in 2023 will record 2.0% growth supported by infrastructure investments and stabilisation in the property sector. The outlook for 2024 is uncertain. The real estate market and exports will continue to exert negative pressure on steel demand and steel demand might contract in the absence of additional government support measures. However, under the assumption that the government will introduce additional measures to support the economy, steel demand in 2024 may sustain the level of 2023. There is a downside risk for both 2023 and 2024 if the stimulus effect is weaker than expected.
