China’s construction activity is showing early signs of recovery as local government debt pressure eases, potentially supporting commodities like steel, according to Goldman Sachs. A recent trip to China, where Goldman analysts engaged in nearly 40 meetings, reinforced their positive outlook on construction-driven commodities demand.

The years-long property crisis significantly impacted materials used in construction, with iron ore losing over a quarter of its value since early last year. However, Beijing pledged further support for the sector, leading to a slight uptick in demand for infrastructure-related commodities for the first time in three years.

Meanwhile, speculation continued over potential supply-side reforms in China’s steel industry. Amid concerns over rising exports and overcapacity, Goldman predicted production cuts of around 50 million tons, emphasizing the need for deeper controls to restore profitability and prevent financial distress in the industry.