The growth of steel production and iron ore imports in China will slow next year for an adjustment in the housing sector, which could pressure on mineral values, according to a Reuters poll.
Despite slower growth, the production of steel and iron ore imports reach record highs in 2012, reflecting Beijing’s efforts to invest in public housing and infrastructure.
Crude steel production would rise by 5.8 percent to 728 million tons in 2012, with consumption growth of 4.6 percent to 685 million tons, according to the median estimate in a Reuters poll from 12 financial firms and industry consultants.
Their projections are compared with an annualized steel production of 688 million tons and an apparent demand of 655 million tons by 2011, according to figures of the year in China until November.
The projected growth is less than the 9.7 percent estimated for production this year and the estimated increase of 9 percent in apparent demand.
Construction accounts for about half the demand for steel in China and the authorities continue to control real estate prices with measures such as tougher lending rules, limits on ownership of multiple homes and controls over access to land.
Analysts say it is unlikely that the strong rebound in steel demand unless the restrictions are alleviated.
“We believe that the main challenge in real estate in 2012 will be delays in the start of property for residential use, as the builders of September recorded capital flows due to tight restrictions on home purchases caused a breakdown in the sales, “said Judy Zhu, an analyst at Standard Chartered Bank.
China’s housing market, which used to be an attraction for speculators, are beginning to see price declines, and with them, the income of those who invested in its development, affecting the ability of some investors to pay their loans.
Zhu said the inadequate access to credit remains a problem in 2012, especially for residential projects.
“Although we have assumed that the credit will be less close to the middle of 2012, builders could still delay projects in the next 12 months,” said the analyst.
Some analysts see the recent cut in reserve requirements of banks as a sign that Beijing could be easing its monetary policy to support a slowing economy, but said an easing of restrictions on real estate would help funnel more liquidity into the sector .
The slowdown in steel production notes that imports of raw material, iron ore, also a lower level would rise from 6 percent in 2012, compared with a projected rise of nearly 10 percent this year .
China, the world’s largest buyer of iron ore, care to 720 million tonnes in 2012, compared to 679 million tons projected for this year. Imports of iron ore totaled nearly 619 million tons in 2010.
With declining demand in Europe and the global mining producing at full capacity, prices for iron ore would average $ 150 in cash per ton in 2012, below the average of $ 169 so far this year.
This year was a volatile year for iron ore. Spot prices in February climbed to a record over 191 dollars a ton, only to lose 31 percent of that value in October, when a lower demand for steel in China has reduced the appetite for raw materials.
Category: Business News