CHINESE STEEL GROWTH SPUTTERS WITH SLOWING ECONOMY…
22 February 2012 by Cullen Roche
2 Comments
- After a decade of rapid growth since 2000, China’s steel industry is undergoing a slow growth. This year, crude steel output is expected to be lower than 700 million metric tons.
- Three factors are believed to influence the production of steelworks in 2012. First, the global economic situation will not regain much of its composure in the first half of this year, thus, production for many new projects is not expected to commence in the short term. Second, the government does not encourage steel exports, so policies are likely to be introduced to reduce export tax rebate. And third, iron ore prices remain high, resulting in greater production costs compared to sales prices.
- Related Data: Monthly Production of Crude Steel, Annual Production of Crude Steel, Average Daily Production of Crude Steel, FAI of Real Estate, FAI of Transportation Equipment
What about the impact of the collapse of the “real estate bubble”?
Assuming that it is happening, reduced steel production/consumption would be another indicator of the slowing of the Chinese economy.
http://seekingalpha.com/currents/post/156411?source=kizur
“New data shows a sharp slowdown in China’s property market, with prices generally flat or lower and one report showing no new homes were sold in Beijing during the recent weeklong Lunar New Year holiday. SocGen thinks the correction has further to run, while BofA/Merrill says the deterioration is supported by other data, including a slump in apartment sales. [View news story]
“no new homes were sold in Beijing during the recent weeklong Lunar New Year holiday”
Given the population of the city that either is a misprint or truly scary.
“Beijing, formerly romanized as Peking is the capital of the People’s Republic of China and one of the most populous cities in the world, with a population of 19,612,368 as of 2010.”
If they have a bubble popping in their real estate, I am not sure how they avoid the “hard-landing” that is considered “impossible” by most analysts – I think this might actually qualify as an unexpected shock to the markets. This could in part explain a lot of the recent weakness in the Asia/Pacific area (Singapore, Australia, Japan, South Korea) that was attributed to the Chinese New Year.
Remember when “subprime was contained” ?
We have had pretty much the same assurances coming from the Chinese authorities as well. Interesting to see if in the end they are telling the truth.
China is a demand taker not driver so it reflects (to me) the strength of the world’s economy in aggregate and Chinese New Year or not, the direction seems to be down not up.
Maybe it turns around around with a turn in the US economy in the first quarter but with gas prices creeping up so fast, I do have my doubts.
Patrick Chovanec is a professor at Tsinghua University’s School of Economics and Management in Beijing, China. He is one of the best information sources about China. These recent posts are a must read. markets are not pricing a hard landing, not even a soft landing, just a moderate slow down. But reality is quite different.
http://chovanec.wordpress.com/2012/02/21/china-radio-chinas-slowdown/
http://chovanec.wordpress.com/2012/01/20/further-thoughts-on-real-estates-impact-on-gdp/
http://chovanec.wordpress.com/2012/01/17/bbc-chinas-2011-gdp-numbers/