Steel market is worth looking forward to

For rebar, this year’s limited production policy and real estate regulation on its fundamentals caused a greater impact. October’s property data had the feel of an abyss: real estate fixed asset investment fell 14.8 per cent month-on-month and 5.4 per cent year-on-year; The floor space of new housing starts fell by 21% month-on-month and 33.1% year-on-year, the lowest year-on-year decline of ERW pipe since 2020. Floor space completed fell 20.6 per cent year on year; The floor space sold fell 21.6 per cent from a year earlier, 8.4 percentage points more than the fall in September. It can be seen that the “three red lines” and the introduction of the real estate tax pilot policy fully demonstrate the central government’s determination to “brake” the real estate market.

From the supply side, in the first 10 months of this year, the country’s rebar output was 214.123 million tons, down 1.8 percent year on year. According to the calculation, in the first 10 months of this year, steel bar production was reduced by 3.87 million tons. From the demand side, the steel consumption in the real estate sector accounts for 30% ~ 35% of the total structural steel pipe consumption, accounting for 70% of the total consumption of rebar steel, and the remaining 30% is basically consumed by the infrastructure sector. While October’s real estate numbers were dismal, the overall picture for the first 10 months of the year was not that gloomy. In the first 10 months of this year, real estate fixed asset investment reached 12,4934 billion yuan, up 7.2 percent year on year; Land acquisition totaled 1.141 billion yuan, up 0.2 percent year on year. According to this calculation, the investment in construction and installation projects was 11,352.4 billion yuan, up 8% year on year. While new housing starts fell 7.7 per cent year on year, floor space under construction rose 7.1 per cent and floor space completed rose 16.3 per cent.

In this way, although the area of new housing starts has fallen, but construction and installation projects investment, construction area and completed area have increased year-on-year, enough to cover the impact of the fall in the area of new construction on steel consumption of carbon steel pipe. Meanwhile, a 1 per cent year-on-year increase in infrastructure investment in the first 10 months of this year will also boost rebar consumption slightly. Later, the positive factors in the steel bar market are mainly reflected in the following aspects:

First, considering the necessity of maintaining a stable macroeconomic operation, the government will provide policy protection to the real estate industry even if it “supports but does not lift it”.
Second, 972.9 billion yuan of new special bonds were issued in September and October, a year-on-year increase of 323.2 billion yuan. If 60% of the special bonds are invested in the infrastructure sector, it is likely to drive the growth rate of infrastructure investment by more than 5 percentage points in the two months at the end of the year, and then drive the annual growth rate of infrastructure investment by 1 percentage point.
Third, the pattern of mild steel tube production has been set this year, with the increase of coal production at the end of the year, the task of carbon reduction will be aggravated.