Steel rebar prices in China hit their lowest in three years this week, underscoring flagging growth in the world’s second-largest economy, particularly in its weak property sector.

The spot price of HRB400 20mm steel rebar – used to reinforce concrete for buildings and infrastructure – fell to 3,510 yuan ($507.80) per tonne in Shanghai on Thursday, data from consultancy Mysteel showed. That’s the lowest since April 2020, when the start of the Covid-19 pandemic in China had curbed most industrial activity.

Disappointing demand in what is normally the peak construction season during March and April kicked off the decline, reflected in steel rebar futures falling nearly 17% since late March, with any recovery some months off as China enters its typically slow summer months.

“China’s situation is quite bad. The outlook for steel demand in China has deteriorated compared to three months ago,” Takahiro Mori, executive vice president of Japan’s Nippon Steel Corp, told Reuters on Wednesday.

Property and infrastructure account for about 60% of demand in the world’s largest steel sector, but infrastructure stimulus has slowed, and the property market is showing little growth.

China steel demand declined by 3.4% in April from a year earlier versus an increase of 8.7% in March, analysts at Huatai Futures said in a research note on May 21. Demand in May fell 2.5% on the year, they said.

Also, just 53.11% of new special purpose bonds that are typically used to fund infrastructure projects flowed to the sector in April, down from 56.38% in March and 63.29% in February, analysts at China Future said in a note on May 24.

Investment in the property sector, the largest user of steel, declined by 6.2% year-on-year in the first four months of the year, data from the National Bureau of Statistics showed, worsening from a 5.8% fall for the January-March period. New construction starts by floor area contracted by 21.2% as well over January-April from a year earlier, worsening from a 19.2% fall during the first three months, according to the NBS.

“The impact of stimulus measures on the property sector is not as good as it was before … Demand (for houses) may contract further,” analysts at Sinolink Securities said in a note on Wednesday.

In addition, the manufacturing sector also unexpectedly contracted last month.

The resultant sluggish demand is increasing pressure on steel mills ahead of the summer months of June-August when construction in China typically slows as high temperatures and heavy rain in the south hinder outdoor activity. Only a third of the country’s mills are currently operating at a profit, according to Mysteel, and shares in global miners plunged this week as iron ore prices fell on China’s weak demand.

Steel demand will not improve until September when weather is more favourable for construction and a raft of economic stimulus measures in place since late last year filter through to the property market, an East China-based steel producer said.

Nippon’s Mori said the outlook could be bleaker than that. “It could remain weak at least throughout this year or this fiscal year (to March 31, 2024). Therefore, we don’t expect the market to improve quickly,” he said.