Looking ahead to the third quarter, fundamentals are still pointing to downside risks – Chinese steel demand is still muted on slowing construction and infrastructure activity amid the summer slowdown. The property sector constitutes the bulk of steel demand.
Although all major Chinese cities have rolled out measures to revive the property market, Beijing’s stimulus measures have not yet materialised into higher demand for iron ore.
Unsold housing inventories remain high, and sales have been slow. As long as inventories remain elevated, new investment and building activity will remain depressed, and the drag on growth will persist, our China economist believes.
May’s newly started residential floor space under construction and real estate investment was down 25% and 10.1% year-over-year. New property projects are the key drivers of iron ore and steel demand. We believe this should continue to suppress steel demand in the second half of the year.