Chinese steel futures prices were flat coming out of the October holiday, despite reports that new regulations could boost home sales. A cut in down-payment requirements for first-time buyers could bring forward buying in the tier two and three cities which have been worst hit but a recovery in demand could take months, Kallanish notes.

The January 2016 rebar contract on the Shanghai Futures Exchange closed flat at CNY 1,826/tonne ($288/t) on Thursday, the first day of trading after the national holiday on 1-7 October. The same contract for hot rolled coil lost CNY 9/t to close at CNY 1,853/t.

China has lowered the minimum down payment for first-time house buyers by 5% to 25% in areas without additional restrictions. This makes buying in cities other than Shanghai, Beijing, Shenzhen, Guangzhou and Sanya more affordable and is expected to boost sales, analysts say.

The non-tier one cities were the hardest hit by the slump in both buying and investment and the government hopes faster sales can reduce existing inventories.

Although the news is positive for steel demand, the impact is likely to be delayed. Until inroads are made into existing inventory, there is unlikely to be a major up-tick in investment in new projects. Only when this happens will there be a meaningful hike in real steel consumption.