After the boom in steel production in China and the hope for a quick economic recovery, the demand for construction for infrastructure projects was high, and production bounced back more slowly.
This highlights the challenge faced by policymakers like Beijing and local governments who can control the pace of spending on projects like roads, rails and reservoirs, but have very limited capacity to support exports or domestic demand for machinery and equipment.
Analysts say the uptick in China’s steel industry resurgence following the coronavirus outbreak could deteriorate sharply due to seasonal downturns on construction sites, indicating a longer recovery for the world’s second largest economy from a one-off situation.
Demand for the main steel products used in construction – rebar and wire rod – has averaged over 53% of total rolled steel demand since the end of March, according to calculations based on data from Mysteel.
“We are now approaching the traditional monsoon season and lower steel consumption,” said Richard Lu, senior analyst at CRU consultancy in Beijing. “It will depend a lot on the weather and we should see some decline at least starting in July.” While building materials are losing momentum in demand due to weather conditions, the use of flat products is suffering from the global economic downturn.