SYDNEY, Sept 5: China’s demand for steel to build homes will not peak for another 12 years, a study from the Reserve Bank of Australia (RBA) predicts, boding well for the outlook for Australia’s iron ore exports.
In a study paper on Chinese residential construction, RBA researchers Leon Berkelmans and Hao Wang used projections of urbanisation rates, building size and construction quality to estimate that steel use would not peak until 2024 when it would be 30 percent higher than in 2011.
Iron ore is Australia’s single biggest export earner making over A$60 billion dollars ($61.4 billion) a year, but a recent plunge in prices for the steel-making mineral has threate+ned to put a dent in the domestic economy. The study suggests Chinese demand for steel will continue to grow for some time yet.
‘Residential construction is a key driver of Chinese economic growth and, given its use of steel, construction is an important determinant of the demand for iron ore, which is one of Australia’s most significant exports,’ the study noted.
The study predicted Chinese home building would continue to grow rapidly until 2017 and not fall below current levels until 2030. In 2011, 1.9 billion square metres of residential floor space was built in China, more than the entire residential building stock in Australia.
The building boom is needed in part to house the 20 million annual increase in the urban population. In 1990, just over one quarter of the Chinese population lived in urban areas; today over half do. The urbanisation rate will continue to climb to+ around 70 percent by 2030, the study predicted.
‘We project the urban population will reach almost one billion by 2030 from its current level of 691 million, and then stabilise,’ the paper said.
The study estimated that residential construction currently uses about 14 percent of China’s crude steel output, but this would grow as quality improved, buildings became taller and included more amenities such as underground car parks.
More new homes would also require more appliances to fill them and more commercial buildings and infrastructure to support them, adding to the demand for steel. ($1 = 0.9778 Australian dollars)
(AGENCIES)
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