When China's steel price has slumped recently, no one in the market dare to buy the product. The phenomenon is an abnormal and it is mainly caused by panic psychology, said an official with China Iron and Steel Association (CISA).

 

China's rolled steel output in September had a decrease of 6.3475 million tons year on year, or falling 15.86 percent, and it is very abnormal for a monthly supply on the domestic market to have a 16 percent decline, said Qi Xiangdong, deputy secretary general of the association.

 

There is no reason for such a big decrease when the downstream sectors and of the iron and steel industry, such as automobile, building materials and machine-building, grew at a rate of 10 percent or even above 20 percent.

 

The market's panic about the global economic and financial crisis has been enlarged, thus leading to a price slump as high as 20 percent on Chinese rolled steel market in the first two weeks after the National Day holidays.

 

The phenomenon is extremely abnormal under the backdrop that China's GDP maintained a 9.9 percent growth, said Qi.

 

Owing to panic psychology, neither traders nor downstream clients stock steel product in advance, resulting in an increase in the inventory of steel works.

 

In effort to sell off products, many steelworks sold rolled steel at a loss of 800-1,000 yuan/ton, and the breakeven selling which are popular among big steelworks also hastened the price fall. It has finally formed a vicious cycle. The psychology of not daring to buy products with falling price drags down the price of raw materials, and the rolled steel price thus is forced to drop further.

 

However, Qi believed that as the state issues a string of policies to stimulate the economy, the demand on the rolled steel price will resume a normal level.

 

Now, after recent price slump, the market demand has showed a sign of recovery. The price on the Shanghai rolled steel market has even kept surging.

 

For the prospect of future market, more traders prefer to take await-and-see attitude.

 

Editor:    Ivy

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