A liquidity crunch in the property sector has knock-on effects elsewhere in the Chinese economy, for example in asset-backed securities (ABS). Unquestionably, there were warning signals about the problems in the Chinese property sector.Īccording to S&P Global Ratings, there has been a liquidity crunch for over-leveraged property developers in China this year. New property development in China has been on a downward trend for the past few years and is expected to remain so in 2022. Steel demand is down because all demand is down.Ĭhina’s massive appetite for steel has historically been driven by the property sector. Chinese government authorities have responded with increased fiscal support in the form of tax rebates and new infrastructure spending.

S&P Global Commodity Insights reports that domestic demand in China remains sluggish and consumer confidence has fallen. The most straightforward explanation for the dip in steel production and consumption is the lockdowns and supply disruptions that resulted from China’s zero-COVID policy in the face of the new, more-contagious variants. These numbers begin to take on a deeper meaning when considering that China is the world’s leading producer and consumer of steel. In other words, China is making less steel, selling less steel, and buying less steel. Meanwhile, steel imports into China are down 65.2% on the year and Chinese steel production is believed to be down 2-3% for the year.

In the first half of 2022, China’s steel exports fell 8.7% on the year, according to S&P Global Commodity Insights.

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