China’s construction industry collapses in the first two months

The number of new housing starts in China over January-February slumped by 45% year on year as a result of quarantined construction workers, while residential house prices in February recorded their weakest growth since July 2018, according to National Bureau of Statistics data.

The lack of activity saw rebar inventories climb and domestic rebar prices in Beijing falling to Yuan 3,390/mt at the start of March from Yuan 3,700/mt ($528/mt) before the Lunar New Year break, according to S&P Global Platts data.

Floor space under construction in January-February rose by 2.9% year on year to nearly 6.94 billion sq m, the NBS data released Monday showed. This was less than half the 6.8% growth seen in the same period of 2019.

Property market investment fell by 16.3% to Yuan 1.011 trillion ($0.144 trillion) over January-February. Funding for residential property projects contributed 72% of the total, down 16% year on year to Yuan 731.8 billion.

During the same period, China's property developers obtained 10.92 million sq m of new land leases, down 29.3% from a year earlier. The total value of these new leases equaled Yuan 44 billion, down 36.2% year on year.

House sales fell by almost 40% while average house prices in 70 Chinese cities monitored by the NBS rose by 5.8%, compared with a 6.3% increase in January.

China's total fixed asset investment dropped by 24.5% year on year in the first two months of 2020 to Yuan 3.332 trillion ($0.476 trillion).

Investment in infrastructure construction declined by 30.3% year on year in the first two months, compared with a 4.3% rise in the same period a year ago. China has been speeding up its infrastructure investment since mid-last year and the lackluster January-February numbers could potentially result in further investment.

But provincial governments have struggled to finance infrastructure projects and the lack of revenues during the coronavirus outbreak could further hamper these efforts.

The weak property construction data comes as no surprise as China has been in virtual lockdown since the end of January. The sector accounts for around 35% of steel consumption, and was expected to shoulder most of the steel demand burden this year.