Real Estate Favorable Policies Continue: What Impact Will They Have on Die-Casting Zinc Alloy in the Future? [SMM Analysis]

SMM, October 29: In our daily lives, products such as lighting fixtures, door locks, bathroom equipment, and door and window accessories are all made from die-casting zinc alloy. The real estate sector, as a major consumer of die-casting zinc alloy, has a significant impact on its production. Since the end of September, a series of new real estate policies have been introduced, with the central government aiming to stabilize the real estate market and restore buyer confidence.

Policy Review:
On March 5, the State Council released the 2024 Government Work Report, which emphasized optimizing real estate policies to promote the stable and healthy development of the real estate market.
In April, the central government clarified the need to digest existing inventory and optimize new supply, leading to a wave of local policy relaxations. Local governments introduced 60 lenient policies, 2 neutral policies, and 4 tightening policies.
On May 17, the state introduced a new round of real estate financial policy packages, including the removal of the national floor on mortgage rates, reduction of down payment ratios, and lowering of provident fund loan rates.
In June, China's real estate policy environment remained relaxed. The central government coordinated efforts to reduce real estate inventory and ensure housing delivery, while local governments encouraged "trade-in" housing and the acquisition of existing homes for affordable housing.
In July, the 20th Central Committee's Third Plenary Session approved the "Decision on Further Deepening Reform and Promoting Chinese Modernization," proposing improvements to the "market + guarantee" housing supply system, granting local governments more autonomy in regulation, reforming real estate financing methods and the pre-sale system, and improving the real estate tax system.
On September 24, at a press conference held by the State Council Information Office, the People's Bank of China, the Financial Regulatory Administration, and the China Securities Regulatory Commission announced several major financial policies, including lowering the reserve requirement ratio and policy rates, reducing mortgage rates on existing home loans, and promoting the entry of medium and long-term funds into the market.
On October 12, several banks, including ICBC, ABC, BOC, and CCB, announced plans to adjust mortgage rates on existing home loans in bulk.
On October 17, the State Council Information Office held a press conference on promoting the stable and healthy development of the real estate market, introducing a "stimulus policy package" for the real estate market, including four cancellations, four reductions, and two increases.

In addition, favorable real estate policies have also been implemented at the local level. On the eve of the National Day holiday, the four first-tier cities of Beijing, Shanghai, Guangzhou, and Shenzhen adjusted policies on purchase and loan restrictions, VAT exemption periods, and non-ordinary housing standards, directly boosting real estate purchasing power.

With the continuous release of favorable real estate policies, how has China's real estate development performed in the first three quarters of this year?

According to data from the National Bureau of Statistics, as of Q3, the cumulative sales area of commercial housing in China was 702.84 million m², showing negative growth, with September recording -17%. In terms of commercial housing sales, the situation in the first three quarters of this year was worse than the same period last year.

Despite the continuous release of favorable real estate news since the beginning of the year, the actual data results have been disappointing. The continuous decline in real estate sales area has directly affected the sales of die-casting zinc alloy end products. It is understood that some downstream enterprises in Guangdong, which mainly produce real estate-related accessories, are currently experiencing poor production conditions, with operating rates at only about 50%.

Considering the current situation, although the South China market is a major production area for die-casting zinc alloy in China, the overall real estate market remains relatively sluggish despite the continuous release of favorable macro news.

From the current zinc price trend, since the central bank introduced favorable "stimulus policy packages," zinc prices have fluctuated at high levels. The price fluctuations directly affect downstream procurement demand, with many downstream enterprises showing strong aversion to high prices, impacting the production of die-casting zinc alloy for the real estate sector.

Therefore, the performance of China's real estate sector in the first three quarters was not as good as last year, which also affected the operating rate of die-casting zinc alloy enterprises.

Future Outlook:
According to SMM analysis, although various favorable policies are currently stimulating the real estate market, it will still take some time for the real estate market to truly recover and drive an increase in die-casting zinc alloy production. Additionally, spring and autumn are peak seasons for real estate, while winter is an off-season with more difficult construction conditions. Currently, many cost-effective substitutes are gradually replacing die-casting zinc alloy and gaining market share, such as aluminum alloy with an expanding zinc-aluminum price spread. Given this trend, the actual production of die-casting zinc alloy in the real estate sector is expected to continue decreasing in the future.