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China's property, infrastructure growth rises in August, supporting metals demand

Singapore — China's investment in property rose 11.8% year on year to Yuan 1.31 trillion ($193.8 billion) in August and in infrastructure rose 4% to Yuan 1.35 trillion, S&P Global Platts has calculated based on the latest data released by National Bureau of Statistics Sept. 15.

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The upticks in property and infrastructure investment will lend support to China's domestic metals demand in coming months, market sources said, though tighter credit conditions could soften demand in the fourth quarter from Q3.

Steel, aluminum and copper are key raw materials for construction in China, with the sector accounting for more than 50% of steel consumption, about 35% of aluminum consumption and 10% of copper consumption.

China's property market investment rose 4.6% on year to Yuan 8.85 trillion over January-August, with the growth rate 1.2 percentage points higher than over January-July, NBS data showed. Funding for residential property projects contributed 74% of the eight-month total, up 5.3% on year at Yuan 6.55 trillion.

Floor space under construction rose 3.3% on year to almost 8.4 billion sq m over January-August, the NBS data showed. The growth rate was 0.3 percentage points higher than over January-July. Housing starts rose 2.4% from a year earlier to 198.9 million sq m in August alone, the fourth month in a row of year-on-year increase, Platts calculations showed.

China's fixed asset investment, or FAI, edged down 0.3% on year to 37.9 trillion in the first eight months of 2020, the NBS data showed. The fall narrowed 1.3 percentage points from the decline in the first seven months, and the FAI for August alone was up 4.2% from the month before.

Investment in infrastructure construction edged down 0.3% on year in the first eight months, with the drop narrowing 0.7 percentage points from January-July.

Investment in rail transport investment rose 6.4% on year over January-August, which was 0.7 percentage points higher than over January-July.

Market sources expect more stimulus polices could be announced in the 14th five-year plan later this year and policies like boosting infrastructure projects would support steel consumption. However, some rebar producers are worried about whether they can obtain higher margins in Q4 in view of the build-up in stocks and rising output.

Strong demand from the property sector was lending some support to long steel, aluminum and copper markets in September, market sources said.

China's aluminum and copper prices are expected to hover at high levels in the coming months on expectations of demand rising during the traditional peak season.