China's steel demand for real estate use may fall 6-8 mnt in 2023

During 2023, China's steel demand for real estate development is expected to fall by 6-8 million tonnes on year to 315-317 million tonnes, given the weak demand for housing, according to Mysteel's latest report released on November 29.

Next year, the total area of newly-launched projects is expected to shrink by 3% on year, while that of projects under construction may decrease by 4% on year, according to Mysteel's estimation.

Contributing most to steel demand in the property sector are newly-launched projects and projects under construction. "The improvement of land acquisition and newly-launched projects should be supported by the steady uptick in real estate sales and better expectations that consumers have for the property market in the medium term," the report pointed out. However, the outlook for these two sectors in 2023 is not so optimistic for now, it said.

Since the start of this year, China's central government has introduced a series of measures to boost real-estate sector recovery, such as Beijing's 'One City, One Policy' scheme, aimed at ensuring timely deliveries of presold homes and to stabilize housing demand.

On November 23, the central bank, the People's Bank of China (PBC), and China Banking and Insurance Regulatory Commission (CBIRC) introduced 16 measures to support the steady and healthy development of the country's property market from the supply and demand sides.

A few days later on November 28, the China Securities Regulatory Commission (CSRC) optimized five measures to support equity financing of real estate enterprises, which may also bring some benefits toward the recovery of the country's property market.

Besides, the PBC had announced on November 25 that it will shave the reserve requirement ratio of financial institutions by 0.25 percentage point from December 5, a move seen as also helping to ease the financial pressure on real estate companies.

These measures unveiled by the country's central government could lead to the completed area of real estate in 2023 rising by 8%, the report showed.

However, real estate sales remain depressed, mainly due to the negative expectations citizens have regarding salaries and income, given the downward pressure on the macro economy and the impact of the government's COVID restrictions. Meanwhile, speculative demand has declined substantially with the pessimism in the property market.

Yet despite the positive policies introduced by the government, housing demand needs more time to recover, the report indicated, adding that the weak demand will be an important constraint on property investment and newly-launched projects in 2023.

The real estate sector is a huge user of steel in China, accounting for about 33% in the country's total steel consumption. Among the approximately 1 billion tonnes of steel China consumes annually, about 56% is construction steel, and the proportion for rebar is about 25%, as reported.

Written by Nancy Zheng, zhengmm@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.