After China's steel price stopped rising in the week from August 10 to 14, it ended up dropping in the following week of August 17-21. China's steel market suffered an infrequent plunge over the past two weeks, while output in the first half of August struck a record, clouding forecasters with uncertainties.

 

The SteelHome China Steel Price Index closed at 99.12 on August 21, down 5.29 percent from a week before, and dropping 22.51 percent month on month. But in the April-early August period, prices of China's major steel products increased nearly 30 percent from the lowest point of this year.

 

Ge Xin, an analyst with Lange Steel, said that August is traditionally a weak season for the steel market, and demand from the end-market hasn't completely recovered yet. This has induced the demand for certain steel products to shrink and a result of lowering trading volume. Besides, the price increase sustained 17 weeks and became especially robust in the end, thus resulting in price fluctuations.

 

The price surge led to a continuous increase of steel output, and the capacity has exceeded market demand.

 

According to the latest statistics from China Iron & Steel Association, the daily crude steel output of China's large and medium sized steel producers reached about 1.67 million tons in the first half of August, more than the 1.63 million tons in July, which had already marked a new high.

 

Most of China's steel plants are currently operating at full production. In August, the production utilization rate of 96 production lines of 51 thread steel plants was 94.6 percent, that of 65 production lines of 44 wire rod plants 98 percent, that of 46 production lines of 29 heat coil plants 88.3 percent, that of 39 production lines of 27 medium and thick steel plate manufacturers 88.6 percent, and 38 production lines of 16 cold rolled strip coil manufacturers 89.8 percent.

 

Since a collection of small and medium sized steel manufacturers have halted or reduced production due to the price plunge, large manufacturers are expected to follow later, said Liu yuan, an analyst with China-based steel consulting firm Mysteel.