Property stimulus seen to slow China steel, cement demand decline

Steel production down 4% Y-O-Y in 9 months

China's latest property stimulus measures are expected to help stabilise the demand for basic materials and boost producers' confidence, leading to more reasonable pricing.

However, challenges remain as downstream demand and the lack of significant capacity exits will limit the recovery.

Steel production dropped 4% year-over-year in the first nine months of 2024, with average selling prices also decreasing.

Whilst steel producers' margins started to recover in September and continued in October due to increased downstream activities, this margin expansion may not be sustainable without production control.

Cement output declined by 12% year-over-year in the third quarter of 2024 due to weak demand, although average selling prices increased by 7% year-over-year.

Moderate price and margin recovery are expected as major producers adopt a more rational pricing strategy, but this recovery may be constrained by a lack of significant demand growth and capacity elimination.

On the other hand, aluminium production increased by 4.6% year-over-year in the first nine months of 2024, driven by investments in green energy and healthy manufacturing activities. Despite the release of previously curtailed supply, stable average selling prices are anticipated due to strong demand growth.

The government's recent housing stimulus policies are likely to support demand for basic materials. However, the structural decline in housing demand is expected to continue due to a slowing economic outlook and peak population trends.