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Bloomberg

Kaisa Group Holdings bond default last week underlines how China's faltering property sector is threatening to blunt any rebound in commodities prices.
Half of China's copper consumption and 35 per cent of its steel use is related to real estate, according to Goldman Sachs.
China's new property starts slid 18 per cent in the first three months of the year as a downturn in economic growth leaves a backlog of unsold homes.
Commodities slumped to a 12-year low last month after a decade-long bull market spurred a boom in supply just as demand slowed in China.
The world's biggest metals and energy consumer is facing its weakest economic expansion since 2009 amid a construction downturn that is likely to cap its raw material use.
Kaisa was the country's first property company to default on its US dollar debt.
"The property market will continue to be a drag on metals," said Daniel Kang, a Hong Kong-based commodity analyst at JPMorgan Chase. Kaisa's default is a "signal of weakness in China's property sector," he said.
Construction may continue to slow after the government took steps to reduce the availability of new land for development, weighing on copper demand growth, Goldman analysts including Max Layton wrote.
Consumption of the metal in China, which accounts for almost half of world demand, will grow 2.6 per cent this year, the weakest pace since at least 2007, according to Morgan Stanley estimates.
Global use will increase 2.4 per cent, the bank forecast.
The Bloomberg Commodity Index of 22 raw materials has fallen 2.6 per cent this year, extending its 17 per cent slide last year. Copper on the London Metal Exchange is down 5.4 per cent after dropping to a five-year low of US$5,395 a tonne in January.
Out of 17 analysts, traders and hedge funds surveyed at the World Copper Conference in Santiago this month, nine expected copper to revisit or fall below its low this year while eight said the worst was over.
"Considerable fears over real demand were expressed and some participants have become extremely bearish," Vivienne Lloyd, a Macquarie Group analyst, said in a review of the conference published this week.
China's steel demand, almost half of global use, will fall this year and next, after contracting last year for the first time since 1995, according to the World Steel Association.
The Shanghai Futures Exchange contract for steel-reinforcement bar slid this month to the lowest since trading began in March 2009. Prices are down 8.6 per cent this year.
Kaisa's troubles started in October, culminating in Monday's missed payment.
Anti-graft probes, incomplete financial disclosure and wayward corporate governance have all been blamed for the decline of a company that had US$1.5 billion of cash only 10 months ago.
The housing market may be starting to recover after the government relaxed home-purchase restrictions. Fewer Chinese cities saw new home prices fall last month compared with the month earlier, the National Bureau of Statistics said.
"The worry is we have not seen the worst of the defaults and the question is how that flows down the chain," said Jeremy Goldwyn, head of business development in Asia at Sucden Financial. "It's a question of where do these defaults happen and how will they affect the market."


China's property slowdown stirs commodity bears

Slowing mainland construction is a drag on metal demand. Photo: Reuters

Foreign investors unfazed by Kaisa's default

Kaisa Group Holdings' debt default has not affected other developers in selling bonds. Photo: Reuters

Kaisa keeps investors guessing as bond payment looms

The unexpected return of Kaisa founder Kwok Ying-shing has stoked confusion. Photo: May Tse

Foreign creditors reject Kaisa plan to restructure debt

Kaisa Group Holdings has US$2.5 billion in offshore debt and US$7.6 billion in domestic debt. Photo: Reuters

Business

China Business

China's faltering property market looks set to dampen a rebound in commodities prices as mainland demand for copper and steel falters


Kaisa Group Holdings bond default last week underlines how China's faltering property sector is threatening to blunt any rebound in commodities prices.


China's property slowdown stirs commodity bears

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}China's faltering property market looks set to dampen a rebound in commodities prices as mainland demand for copper and steel falters

China's faltering property market looks set to dampen a rebound in commodities prices as mainland demand for copper and steel falters