[ferro-alloys.com]China's property and infrastructure construction, which account for more than 55% of China's total steel consumption, picked up strongly in May, providing firm support to the domestic steel market at a time when the country's crude steel output has hit an all-time high.

China's daily crude steel output increased 5% on the month and 4% on the year to 2.98 million mt/day in May, but strong demand from construction sites pushed the average Chinese domestic rebar margin to $71/mt in May, from $56/mt in April, S&P Global Platts analysis showed.

Floor space of property sales and new starts increased 9.7% and 2.5% year on year in May, both marking the first positive growth for these measures in 2020, Platts calculates using National Bureau of Statistics data on June 15.

During the property construction period, steel consumption is usually the strongest in the first three to five months. The strength of property new starts is positively correlated with the trend in property sales.

Over January-May, property sales and new starts dropped 12.3% and 12.8% year on year, but this was stronger with the 19.3% and 18.4% year on year fall over January-April, respectively.

Meanwhile, infrastructure fixed asset investment improved in May, falling just 6.3% over January-May compared with an 11.8% decline over January-April, NBS data showed. Some steel market watchers said infrastructure FAI increased by around 8% in May, from a 2% growth in April.

Market sources expected steel demand from infrastructure construction to remain strong in the second half of 2020, driven by supportive fiscal policies such as boosting local governments' special bonds.

However, sentiment regarding property sales over July-December was mixed, with some expecting monetary loosening to offer strong support, while others were more cautious.

One source said the strong rebound in property sales in May was partly due to a delay in some purchases over February-March when China was under lockdown. A rush of construction starts to make up for lost time contributed to strong new starts.

The source said monetary loosening would help support the sector, but a reduction in household income, highly leveraged Chinese residents, and Beijing's determination not to use property as stimulus, all weighed against property sales and, indirectly, new starts.

If the strength in property sales fails to be sustained in the following months, China's all-time high steel production, and its soaring steel inventories could pose a real challenge to domestic market prices, he added.

New home prices in China rose month on month in May before in 57 of the 70 Chinese cities monitored by the NBS. Prices fell in 11 cities and were unchanged in two.

Floor space of commercial buildings waiting to be sold totaled 517.71 million square meters over January-May, down 4.83 million compared with January-April.

(S&P Global Platts)

• [Editor:王可]