China’s continued weak real estate sector is putting downward pressure on steel demand expectations

January iron ore futures, the most traded on the Dalian Commodity Exchange, fell by 8.2% to 698 yuan/t ($97.52/t) for the period August 1-15, 2024. On the Singapore Exchange, quotes for September benchmark futures as of August 15, 2024, decreased by 7% compared to the price as of August 1 – to $93.6/t.

During the first half of August, iron ore prices fell to a 14-month low as the continued weak performance of China’s real estate sector put negative pressure on steel demand expectations. In particular, in January-July, investment in Chinese real estate fell by 10.2% y/y. The number of new construction starts since the beginning of the year decreased by 23.2% y/y. The real estate market continues to be the main consumer of steel in China, despite the falling share of this sector amid the ongoing crisis since 2021, so the state of the construction industry directly affects steel companies, demand for steel and raw materials.