As we discussed in Commodore Research's most recent Weekly Dry Bulk Report, February ended with 760 million square meters of floor space available in China's commercial buildings (which includes residential buildings). This marks the largest amount we have ever seen.
As we have been stressing in our Weekly Dry Bulk Reports and Weekly China Reports, the last several years have continued to see an ongoing increase in new floor space in China’s housing market. This continues to come not from just more homes being built in China, but very significantly also from sales decreasing. Sales this year have so far contracted year-on-year by 25%. 2024, while still in its infancy, is so far marking a third straight year with sales contracting. This year’s contraction is also so far larger than the 16% contraction that was seen last year, and it is very close to the record 26% contraction that was seen in 2022
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Overall, 2017 was the last year that saw any significant growth in housing sales in China. 2018 through 2021 saw growth average just 1% (which included a small contraction in 2019), and 2022 through this year have seen a dramatic contraction. As we have also been stressing in our reports, 2017 is when furniture sales in China peaked.
While excess in the housing market remains extreme, we continue to stress that supply and demand of Chinese homes is not what drives China’s dry bulk spot demand. We have written often that “the production of steel, consumption of iron ore, consumption of coal, global mining, etc. are what drives China’s commodity imports and spot demand for dry bulk vessels”. We are still not very concerned that China will suddenly pull back on buying iron ore on its own, and if anything we expect that China will be happy to keep purchasing a large amount of iron ore (that is of much higher quality than what is mined in China) at what has now become much cheaper. Global mining, though, is what is now at play. As we have been discussing in recent reports, our concern is that global iron ore miners will pull back on selling due to the recent collapse in iron ore prices.
