China’s construction steel demand likely to remain low for rest of 2022

China’s domestic demand for construction steel is likely to remain low for the rest of 2022, market participants told S&P Global commodity insights, with the key indicator of excavator sales declining for the fourth straight month in July.

China’s domestic excavator sales were down 24.9% year on year at 9,250 units in July, the second-lowest level until now, China Construction Machinery Association showed on August 11.

Domestic excavator sales fell 51.3% yearly to 100,374 units over January-July.


A sharp slowdown in new housing starts as the central government tightens financing to indebted developers was the principal reason behind poor construction activity.


Chinese steelmakers were forced to raise their steel output cuts in July as weak construction steel demand pushed their profit margins into negative territory.

Steel market inventories dropped quickly in July amid the higher output cuts, which finally triggered an upward correction in steel prices and margins in late July.

Rebar inventories held by traders in eastern China’s Hangzhou city were down by around 27% from late June and 33% lower year on year as of Aug. 11, according to market sources.

On the same day, inventories of long steel — mainly rebar and wire rod — in southern China’s Guangzhou spot market were also about 27% lower from late June and down 24% on the year.

The Chinese domestic rebar sales profit margin increased to almost $50/mt on August 10 due to the reduction in steel output and inventories, up from a negative $61.9/mt on July 15, according to data from S&P Global Commodity Insights.

Some market sources said the quick decline in the steel market inventories was also because traders were destocking, given the bleak outlook for steel demand for the rest of 202

“Any further policy support to property sector for the rest of 2022 will mainly focus on completions and on-time delivery of pre-sales, rather than new housing starts. That means raw materials such as copper or aluminium may start to benefit from the recovery in property completions later this year, while construction steel demand is unlikely to improve,” a market participant said.

A mill source said, “Not only traders, but major steel mills as well are wary that poor new housing starts will continue to undermine China’s steel demand, so mills, in general, are still cautious about ramping up steel output or commissioning new iron or steelmaking capacity at the moment.”

Although China’s steel output may rebound in August in line with improved profit margins, most sources said the product would remain at relatively low levels for the remainder of 2022 because of poor demand.