While property accounts for almost 40% of Chinese steel consumption, the government’s focus on reviving home buying by cutting interest rates and loosening mortgage rules will take time to translate into the new housing starts that use the most steel, according to a note from Mysteel.
Moreover, the stimulus is being targeted at the biggest conurbations, although first-tier cities like Beijing and Shanghai account for less than 3% of commercial housing sales, the research firm said. With buyers’ leverage ratios high and sentiment soured by the protracted crisis, the government’s efforts so far may result in only a limited boost to steel demand, suggesting further policy support will be required, Mysteel said.Looking beyond the property market, the picture for prices is a little brighter. Construction activity usually lifts in the autumn and local governments have accelerated borrowing for infrastructure investment.