[Ferro-Alloys.com] Stronger than expected floor space starts in China in October indicates demand for steel from the property construction sector could be stronger than anticipted in early 2020.
In October, floor space starts increased 23% year on year and took January-October starts to 1.85 billion sq m, which was 10% higher year on year, according to National Bureau of Statistics data released Thursday.
Property construction accounts for roughly one-third of China's steel consumption and floor space starts is an important indicator of demand for rebar and other construction steels.
Due to robust property construction and retreating iron ore costs, China's average rebar and hot-rolled coil sales margins have increased to $64.03/mt and $19.89/mt so far in November, up from $43.08/mt and $5.96/mt in October, according to S&P Global Platts data.
Chinese traders said strong end-user demand for construction steel has continued into November, and would probably last into December. Construction activity has speeded up in the past month or so as China's Lunar New Year holidays start early next year on January 24. This is the time when migrant workers, who largely make up China's construction industry workforce, return to their home towns, causing work on building sites to stop for 2-3 weeks.
China's apparent steel consumption over January-October increased by 8.1% year on year to 770 million mt, 0.7 percentage points higher than crude steel output growth over the same period, Platts estimates.
For January-October, floor space under construction went up 9% year on year to nearly 8.54 billion sq m, the NBS data showed.
China's fixed asset investment rose by 5.2% year on year in the first ten months of 2019, which was 0.2 percentage points lower than the growth recorded for first nine months.
Investment in infrastructure construction rose by 4.2% year on year in the first ten months, 0.3 percentage lower compared with previous nine months, the NBS data showed.
Property market investment increased by 10.3% to Yuan 10.9 trillion ($1.55 trillion) over January-October. The growth was 0.2% lower compared with January-September. Funding for residential property projects contributed 73.6% of the total, up 14.6% year on year to Yuan 8.06 trillion. (S&P Global Platts)
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