(Bloomberg) -- The world’s top steelmaker has added its voice to the growing sense of alarm among China’s mills over crisis conditions in the industry due to poor demand and plunging profits.   

China Baowu Steel Group warned of headwinds due to a “complex macro economy” and the severe impact of Covid flareups across the country, according to a posting on the group’s WeChat account. Weak demand, falling prices and declining profitability are causing “great challenges” for the sector and testing the group’s production and operations, it said.

Other mills have raised similar fears in recent weeks, but the warning from China’s flagship producer is likely to resonate with policymakers as they seek to revive the economy and shore-up the nation’s flailing property market, which is central to steel consumption. China is the biggest producer and consumer of the alloy, globally.

The government has promised a massive push on infrastructure spending to rescue growth, but Baowu’s pessimism seems to indicate a lack of conviction that the stimulus will deliver enough of a boost to construction and steel demand. 

Meanwhile, the slump in the real-estate market is worsening after a wave of mortgage boycotts due to unfinished housing, which, along with Covid restrictions, is likely to drive steel output lower in the second half, according to a note from Bloomberg Intelligence analyst Michelle Leung. Property and infrastructure have typically accounted for more than half of China’s steel demand.

Certainly, the property side of that equation is getting the most focus at the moment.

“Since 90% of residential property sales in China are of uncompleted units, a perception that developers cannot be trusted to finish construction will make people more unwilling to buy new housing, creating an even bigger problem in real estate,” Andrew Batson, research director at Gavekal Dragonomics, said in a report.

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