Review of Steel Usage in the Construction Sector: Traditional Major Steel Consumers Under Pressure, Crude Steel Demand Structure Accelerates Reshaping
Real estate and infrastructure, as traditional major steel consumers, have seen their demand contraction trend become a core variable driving the evolution of the industry landscape. At the aggregate level, national crude steel demand decreased from 1.05 billion mt in 2020 to 910 million mt in 2025. Within this, steel demand from real estate dropped from 411 million mt to 261 million mt, a decrease of 36.5%; steel demand from infrastructure fell from 219 million mt to 179 million mt, a decrease of 18.3%. The dual pressures of a deep adjustment in the real estate sector and marginal convergence in infrastructure investment are significantly suppressing upstream steel demand. Structurally, the proportion of steel used in real estate declined from 39% in 2020 to 29% in 2025, while the proportion used in infrastructure decreased from 21% to 20%. This synchronous contraction indicates a weakening of the traditional growth model driven by infrastructure and real estate. Meanwhile, the proportion of steel used in diversified sectors such as automobiles, machinery, and home appliances increased from 40% to 51%, gradually becoming a new pillar of crude steel demand. The downstream demand structure of the steel industry is undergoing a profound transformation, shifting from being driven by traditional infrastructure and real estate to being driven by diversified industries.
Data source: Public information, SMM
Real Estate:From "Incremental Development" to "Stock Upgrade" – Real Estate Continues in a Phase of Deep Adjustment
Investment & Sales side, from January to December 2025, national real estate development investment totaled 8,278.8 billion yuan, down 17.2% YoY; the floor space of commercial buildings sold was 881.01 million m², down 8.7% YoY; funds secured by real estate development enterprises amounted to 9,311.7 billion yuan, down 13.4% YoY. Supply side, the floor space of buildings under construction was 6.5989 billion m², down 10.0% YoY. The floor space of buildings newly started was 587.7 million m², down 20.4% YoY. The floor space of buildings completed was 603.48 million m², down 18.1% YoY. The data shows that multiple indicators in the real estate sector remain in a period of deep adjustment, with significant YoY declines across various data points in Q4 2025.
Data source: Public information, SMM
Real Estate: Decline in Real Estate's "Investment" Attribute, Disappearance of the "Core Driving Force" of Mortgage Loans
In 2025, housing prices continued to be in a declining phase, directly leading to the fading of real estate's "investment" attribute. The traditional logic that "mortgage leverage = asset appreciation" no longer holds. Coupled with income/employment uncertainty during an economic downturn, household risk appetite decreased significantly, shifting from "actively adding leverage for home purchase" to "passively deleveraging for risk avoidance." These two factors reinforced each other, creating a negative feedback loop that ultimately drove mortgage loan willingness to a low level. The latest data shows that the monthly value of individual mortgage loans in December 2025 plummeted by 42.7% YoY. Personal mortgage loan conditions directly impact the speed at which real estate companies can recover funds from sales. The amount of recovered funds determines how much capital is available for land acquisition, project initiation, and construction investments. Currently, the financial realization of residents' home purchasing needs, as well as the transmission to developers' supply capabilities, has significantly weakened.
Data source: Public data, SMM
Real Estate: Weakening Demographic Dividend Reshapes Housing Demand Logic
China's population structure exhibits a distinct "barrel-shaped" feature, with a large proportion in the 40-69 age range, lacking continuous support from new births, leading to a weak follow-up of the home-buying age group; by 2025, the proportion of people aged 60 and over reached 23%, indicating a deeply aging society, fundamentally changing the structure of housing demand. In 2025, the national birth rate dropped to 7.92 million, falling below the 8 million mark for the first time, a YoY decline of 56% compared to 2016. The continuously shrinking newborn population directly undermines the foundational support for real estate demand, implying that the size of the young, home-buying demographic will continue to shrink, with first-time home purchase needs driven by marriage and child-rearing entering a long-term contraction phase. Changes in the population structure have led the real estate market to bid farewell to the era of universal growth, with the market space for traditional rigid-demand housing continuously narrowing, while the demand for improved and elderly-friendly housing gradually becomes more prominent. The differentiation in population mobility further results in significant differences in the real estate markets of different cities.
Data source: Public data, SMM
Real Estate: As the Real Estate Industry Consolidates at Lows, Indicators Are Expected to Narrow Further
Since 2021, the land market has completely moved away from a competition landscape dominated by private enterprises, shifting towards a dual-mainstream pattern of central state-owned enterprises and local city investment. Central state-owned enterprises continue to dominate land acquisitions. The stepwise contraction in land acquisitions by real estate companies from 2020 to 2022 essentially represents a fundamental shift in the business logic of the real estate industry. The restructuring, with central state-owned enterprises taking the lead and private enterprises weakening, signifies that the real estate industry has bid farewell to the era of high leverage and high turnover, entering a new development stage focused on stable operations.
Additionally, looking at the real estate situation across first, second, and third-tier markets, the price trends of newly built residences have been similar over the past two years. However, in the long term, prices in first and second-tier cities are expected to continue recovering, while third and fourth-tier cities still face destocking pressure, making it difficult for prices to rebound significantly. The liquidity of second-hand residences is relatively good, with prices rising rapidly after the 2020 pandemic, especially in first-tier cities where prices remain resilient. However, in recent two years, the price decline in first-tier cities has been faster than in second and third-tier markets, with volume discounts remaining the mainstream strategy for developers. The market has entered an era of replacement and improvement, with increasing divergence.
In 2026, considering that multiple data points such as investment and sales continued to weaken, the real estate sector is expected to consolidate at lows. However, driven by multiple policy efforts, its downward pace continued to slow down, and the drag on economic operations and steel demand also eased. In the long term, from 2027 to 2030, after macro policies provide a floor and the domestic economic cycle further recovers, the real estate sector's decline is expected to slow, entering a new phase of high-quality development focused on stock upgrades.
Data source: Public information, SMM
Infrastructure:Special Bonds Focused on Land Reserves + Debt Resolution, Squeezing Funding for the Infrastructure Sector
From the perspective of special bond issuance, the main characteristics in 2025 were total expansion and structural adjustment. In terms of total volume, according to Ministry of Finance data, the issuance of new special bonds by local governments in 2025 reached 4.6 trillion yuan, up 14.4% YoY. The annual quota of 4.4 trillion yuan for new special bonds was exceeded. However, considering that 800 billion yuan was used for resolving existing debt, and land reserve funds amounted to approximately 545.1 billion yuan, which saw significant growth in 2025, the actual funds available for new investment projects decreased compared to the previous year.
Focusing on the main steel-consuming areas in infrastructure, the scale of special bonds for transportation infrastructure in 2025 fell 20.6% YoY to 541.221 billion yuan. This contraction in funding directly suppressed core steel-consuming areas in infrastructure. By sub-sector, the declines in railways (-30.4%) and other transportation infrastructure (-28.3%) were significantly greater than the overall average, indicating a substantial reduction in funding for long-haul trunk railways and ordinary road projects.
Data source: Public information, SMM
Infrastructure: Weakening Investment Support Effect, Limited Room for Growth in Steel Demand
Starting from March 2025, infrastructure investment growth continued to slow, marking the first annual decline in infrastructure investment in nearly five years. Investment demand in traditional infrastructure sectors was clearly under pressure, primarily due to two fiscal factors. On one hand, the issuance pace of new government special bonds in H1 was slower than the same period last year, leading to delays in the deployment of funds for infrastructure projects, which directly affected project commencement and construction progress. On the other hand, debt resolution gained higher priority in 2025, significantly squeezing out effective funds that could have been allocated to infrastructure projects, further constraining investment implementation. Full-year data showed a clear negative growth trend in infrastructure investment, with cumulative broad infrastructure investment down 1.48% YoY and narrow infrastructure investment down 2.2% YoY in 2025.
The construction industry has entered a new normal with cumulative newly signed contract values declining for two consecutive years. As of September 2025, the cumulative YoY decline in industry newly signed contract values reached 4.55%, indicating continued pressure on industry orders. Market feedback has long highlighted the issue of tight funding, with local fiscal pressures, low project capital availability, and tight real estate developer cash flows all contributing to a limited number of construction projects getting started. In 2025, the intensity of infrastructure investment gradually weakened, and the pace of new project releases slowed down, affecting steel demand in the infrastructure sector.
Data source: Public information, SMM
Infrastructure: Increased special bonds + accelerated major projects, dual drivers for stable growth in infrastructure demand
Although the marginal benefits of infrastructure investment are diminishing, given that there is no sign of an upward turning point in real estate development investment, we believe that the infrastructure sector will continue to play a counter-cyclical "stabilizer" role in the economy in 2026. The scale of new general and special bonds is expected to increase further in 2026, with the new special bond issuance potentially reaching 4.7 trillion yuan, and the total scale possibly increasing to 5.5 trillion yuan. Special bonds for land reserves and debt resolution will continue to be issued.
Since 2025, several large-scale infrastructure projects have been launched. The hydropower project in the lower reaches of the Yarlung Zangbo River officially commenced on July 19, 2025, in Nyingchi, Tibet, and SMM estimates it will drive about 6-8 mt of steel consumption; the national strategic railway project connecting Chengdu, Sichuan, and Lhasa, Tibet—the Sichuan-Tibet Railway—is scheduled to be completed and operational by 2026; additionally, over the next five years, the country plans to invest 1.5 trillion yuan in upgrading rural roads, reconstructing 100,000 km of rural roads; in urban construction, ultra-long-term special treasury funds and central budgetary investments will support the implementation of approximately 3,800 underground pipeline construction and renovation projects across various regions.
In 2026, the Ministry of Finance clearly stated that it will expedite the process of issuing debt limits to ensure funding needs for key projects in Q1 2026, and allocate 500 billion yuan from the remaining local government debt limits to support local construction. It is expected that fiscal policy in 2026 will continue to bolster infrastructure demand; however, considering the diversion of debt resolution funds, more resources may be directed towards sectors outside traditional steel usage, limiting the steel demand driven by the infrastructure sector in 2026. Over the long term, from 2027 to 2030, the pace of infrastructure support will remain steady, with new infrastructure and existing upgrades advancing concurrently, and stable growth is likely to be the main theme.
Data source: Public information, SMM
Steel demand forecast for the construction industry:A transition period for traditional steel demand between "better housing" and "quality infrastructure"
Data source: Public information, SMM
From 2026 to 2030, as the domestic demographic dividend gradually diminishes, the era of rapid growth in the real estate industry will come to an end, and the industry's development logic will shift from scale expansion to quality improvement. During the 15th Five-Year Plan period, the high-quality development goals for the real estate sector have been clearly defined. The industry's core development direction has shifted from addressing the basic need of "having a place to live" to comprehensively upgrading to meet the quality demand of "living in a good home." Projects aimed at improving housing quality and initiatives to enhance the quality of property management services have become development priorities. With the slowdown in the pace of development and construction and the optimization of the business format structure, the traditional incremental boost that real estate provides to steel demand continues to weaken. At the same time, the 15th Five-Year Plan period is also a critical window for the transformation of infrastructure investment in China. The infrastructure development model has completely moved away from the traditional reliance on large-scale investment, focusing on large-scale investments in railways, highways, airports, water conservancy projects, and other "iron-based public infrastructure" as the core of strong stimulus pathways. It has entered a new stage centered on structural optimization, focusing on building an intensive, efficient, technologically driven, green, low-carbon, open, shared, and interconnected modern infrastructure system. With a development orientation that prioritizes quality over quantity, it is difficult for infrastructure to generate significant incremental demand for steel. According to SMM estimates, the downward trend in steel demand from traditional construction sectors will continue from 2025 to 2030, but the downward momentum will gradually diminish, and the rate of decline will continue to narrow. Steel demand for real estate is expected to reach 210 million mt by 2030, a decrease of 19.4% compared to 2025. During the same period, the infrastructure industry, supported by structural optimization and strategic projects, will exhibit marginal stability characteristics. Steel demand is projected to reach 188 million mt by 2030, a slight increase of 4.9% compared to 2025.
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