Fine China?
China- Handle with Care.
China and steel. One fragile, and one famously strong. Yet the fate of steel is, bizarrely, driven mostly by the outlook for China. Responsible for just shy of half of the world’s steel consumption in 2014, China’s impact on prices and innovation within the steel industry dwarfs that of the U.S., that has a paltry 5% share. There are some amazing skyscrapers across the country but just Google the term ‘Chinese ghost cities’ and you will see where much of this steel has gone. There are entire cities, complete with shopping malls, road networks and parks that are sitting waiting for people to live there and yet nobody comes. Huge cities are no good to people if they are too far away from places of work. Also the Chinese are not permitted to invest overseas, so these buildings have been bought as investment properties rather than as homes.
This however is slowly changing. China, the world’s second largest economy, is trying to shift away from inward investment (where half of the country’s GDP is generated by government spending on construction and industry) to a consumer driven society as seen in the West. Rather than building cities and apartment blocks that lie empty, the focus has shifted and the world’s most populous country is investing more than $100 billion a year developing its railways. Continued Chinese demand for steel is good news for the steel industry, but what does this mean for steel and prices? Excess capacity of steel is shrinking, and price stability may be round the corner.
What does that mean for you? In fact, it should be really good news. A composite of steel prices globally shows that since early 2011, the price of this versatile and essential commodity has fallen more than a third. How long will this fall last is of course difficult to predict so perhaps now is the time to take advantage.
We wrote previously about slowing house prices and the time being right to work on your own house (DIY Home Improvement). Well, it’s still the right thing to do and as the steel price tide may be turning, now may be the best time to do it. Yields globally and loan rates have fallen to all time lows as Europe’s belated quantitative easing starts. House prices are near all time highs and affordability getting tougher. Improve don’t buy is the message. With commodity prices looking like they are turning,financially it is the best time to make those changes to your home you have been thinking about.
The options steel offers in home improvement is very wide with balustrades, handrails, sliding doors all readily available in a variety of different styles to enhance your home. It might be that when considering investing in a walk out balcony, you are thinking of the summer and lying out in the sun but spare a thought for the ghost cities of China. These empty apartment blocks, with penthouses and roof gardens may seem a long way from your home in the U.K. (and of course they may not!) but it is worth remembering that in our global economy, China is a key player, and in the end all of us are affected by what happens there in some way. The topic of a blog for another day…..
Please login to Comments