Steel consumption in the downstream sectors in China has seen a decline since Q2 2011. Domestic demand in downstream sectors failed to pick up after sales in automotive and home appliances continued to weaken.

A slump in high speed railway investment and a depressed property market have also brought down market demand.

Major steelmakers in China have announced price cut for September bookings. Analysts noted that the steel price is likely to decline further on the sluggish demand.

September and October are the traditional consumption peak season for China’s iron and steel sector, but over-supply pressures as well as macro-economic uncertainties continue to weigh on the market demand.

Spot prices of steel products have been consolidating around RMB4800/t (US$753) since September, while shipment of many traders stayed thin. In sharp contrast to the sluggish demand, surging raw material cost is the major factor hitting steelmakers. The price of iron ore has increased for four weeks since mid-August, in a range of US$187-189/t, approaching the year-high of US$190/t reached in April.

In response, Baosteel has made its second price hike of the year for September and October orders in anticipation of a pick-up demand in the traditional consumption season.

However, few other mills have echoed Baosteel’s price increase.

The growing possibility for a ‘double dip’ recession in the world economy due to the looming debt crisis in Europe as well as disappointing monetary policies recently announced by the US government is eclipsing the prospects of domestic growth in China.

Source: China Metals e-mail [email protected]