China's property sector continues to weigh on steel demand. Housing starts fell 8.7% year-on-year through May, with new home sales declining 11.2%. The property market downturn, now entering its fourth year, has reduced China's total steel demand by an estimated 60-80 Mt annually since 2021.
Infrastructure investment grew 6.3% year-on-year through May, providing a partial offset. Transportation infrastructure (roads, railways) was up 8.1%, while water conservancy projects rose 11.4%. However, infrastructure steel intensity is lower than property — every 1% of infrastructure GDP growth requires roughly 60% of the steel that 1% of property GDP growth requires.
Manufacturing investment grew 5.9% year-on-year, with machinery and automotive as the largest contributors. Auto production rose 3.2%, and machinery output grew 4.5%. These sectors account for approximately 35% of Chinese steel demand and are relatively stable.
Chinese steel exports fell 4.8% month-on-month in May to 9.1 Mt, after a surge in Q1 that drew anti-dumping investigations from several importing countries. The export decline removes a source of demand that had partially compensated for weak domestic consumption.
The H2 demand picture for iron ore is soft. Property sector weakness is structural and unlikely to reverse in 2026. Infrastructure and manufacturing provide some support but not enough to drive prices above $110. Buyers should budget for $95-105 range for the remainder of 2026.