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After a Lull in January 2015 - China's steel production rises in February

In February 2015, steel production in China increased 3.4% on a YoY basis after decreasing 4.7% in January. So far this year, the trend in China's steel production has been uneven. However, looking at the first two months, steel production is down 1.5% on a YoY basis.

China has been producing steel in excess of its domestic demand for several years. Steel exports from China have reached record highs as a result of this overproduction, making China the world's biggest steel exporter.

Increased China's steel production is a negative sign for the global steel industry. Steel production has increased in China, while the demand indicators of its domestic steel industry have only worsened since last year. In the next part, we will discuss the indicators of China's steel demand.

Building sales are widely tracked as an indicator of China's real estate industry. YoY change in building sales in China, which fell by 15.8% in February. Building sales in China have fallen in every month since February 2014, showing a clearly downward trend for China's real estate sector. A slowdown in the Chinese real estate industry is a major risk for the global steel industry. A slowdown in domestic demand has led to higher steel exports from China.

The Chinese government announced several enticements for the housing sector, including an interest rate cut. However, these measures have yet to have any major impact on the country's beleaguered real estate industry.

Property prices have also been weak in China. New home prices have fallen in 66 out of 70 top Chinese cities and in January, prices had fallen in 64 cities. This decline in real estate prices is a negative indicator for China's real estate industry, and the fall in property prices negatively impacts investor sentiment.

China's real estate climate index has been on a downward trend since February 2010. The index stood at 93.7 in its latest reading in February 2015, representing a new multiyear low. The index has been below 100 since October 2011. The fall in China's real estate climate index is another grim reminder of the slowdown in its real estate industry. China's real estate sector has been a key driver of global steel markets, and its construction industry accounts for more than a quarter of global steel consumption.

Source - Market Realist

Mar 29, 2015 08:22
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