The recent steel price slump in China's market was caused by various complicated factors, including macro-control measures and speculative activities, and cannot be simply attributed to oversupply.

Vice Secretary-General Qi Xiangdong of the China Steel and Iron Association made the remark in an exclusive interview with the Economic Information Daily.

Since April this year, prices in the domestic steel products market have plunged, with the price of hot-rolled plates and rolls even shrinking by more than 40 percent in some places compared with its highest level this year.

So as to curb the sudden drop of steel prices, the China Steel and Iron Association urgently convened representatives from 45 major steel enterprises across the country to discuss response options.

After the meeting, all steel enterprises agreed to cut their steel output by 5 percent to stabilize market prices.

It is abnormal to see such a sharp steel price fall this year, Qi told the newspaper.

Statistics show the new resource supply on the domestic market stood at 37.36 million tons in the first three quarters, up 18.6 percent year on year, while domestic consumption grew 19.25 percent in the corresponding period, with demand and supply basically coordinated.

Since April, the government has launched a series of macro-control policies, including abolishing the tax rebate for billet export, annulling its favorable policy toward "processing rolled steel only for export," and lowering the tax rebate rate for rolled steel export, which has caused the "over-sensitivity and over-panic" in the market, said Qi.

The rapid growth of China's steel production made people fearful of future price trends, and those in the steel production, sales sectors, experts and even overseas research institutions expected the steel price in China to further drop, he said.

"This kind of market expectation is groundless actually," Qi opined.

Qi attributed the market disorder to rampant speculative activities, saying increasing e-commerce trading encouraged speculation on steel prices.

There are over 200,000 enterprises engaging in rolled steel trading in China, and any market fluctuation could cause them panic and magnify the effect of price oscillations in the market, he said.

Whether the problem of serious oversupply exists in China's steel industry can be measured with the indicators of the social stockpile, sales, supply-demand relations and the profitability of steel enterprises, he said.

Since this year, the social stockpile of steel products in China has been maintained at a normal level, and during the Jan.-Aug. period, 98.47 percent of rolled steel produced had been sold, figures show.

During the first eight months this year, the profit of 68 major steel enterprises in China grew 19.33 percent year on year, with only 5 witnessing losses.

"It is the expectation of serious oversupply that is causing a price slump in the steel market," Qi said. "China's steel market still has room for further development, and currently, restoring market confidence is paramount," he said.

Source: Xinhua