Date: 2013-07-31

Chinese Steel Consuming Sectors Continue to Slide

It is reported that major steel consuming sectors all have shown clear sign of slowdown over the past few months. Market analysts fear that steel price would weaken further once these down-stream sectors continue to head downward.

Property sector contributes half of China's steel demand. Of this, urban housing takes up 34% of the steel consumption. However, the property sales have posted negative growth for the first time in 11 years this year. And the bleak real estate looks set to drag on, which could further weaken the steel demand in near future. Meanwhile, machinery industry, which accounts for 16% of steel consumption, is also contracting. The data shows that China's machinery sales totals CNY 5.76 trillion in the first eight months of this year, and machinery export amounts to CNY 0.88 trillion down by 1.81% and 3.1% respectively from three months earlier.

Analyst with China Bank revealed engineering machinery sales has started to moderate in the third quarter, however, many producers have maintained high production level and built up massive stock in anticipation for purchasing boom after the Olympics. However, the demand has not recovered as expected, while the physical economy has shown much greater decline than expected.

Home appliances-representing 5% of China's steel consumption-has registered lower output growth since last December. Latest statistics show that major steel-consuming white goods, like washing machine and refrigerator, have reported steep decline in production growth. That is partially triggered by gloomy property market. Automobiles sector mainly requires high value added steel plate, special steel and tubes, although it accounts for 3.62% of domestic steel demand. Mysteel analyst believes that automobiles industry is near the end of the fast expansion phase, with the production and sales volume started to plummet since this March.

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