China's scrap supply will increase, there is no doubt. But do not underestimate the housing that still needs to be put in place going forward. A majority of Chinese still live in two-room housing with communal toilets, often with multiple families cohabitating in those two rooms. Even in the big cities. Those 1970s era flats will be replaced with normal multi-roomed flats. Yes, they will generate scrap, but they are being replaced with high steel intensity construction.
The "property slide" is a very misreported phenomenon. Rich developers and party cadre got into property development quickly, and saw the profit in luxury flats. It is no surprise that an excess of luxury offerings in the big cities, and developments in areas where there is no demand (built through corruption riddled processes) stand empty. These are the developments that give rise to the "ghost city" stories.
The central government is well aware that the human exodus from the country to the cities by peasants will continue unabated. These peasants simply cannot afford the luxury flats that are in surplus (and I am using "luxury" in a relative sense). Even now, the govt is stepping in and building affordable housing - following the model set by HK. They simply have to improve the lot of the masses or face a revolution.
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