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Steel Prices Drop in China

Good news for those of us in the steel industry–the Chinese are trying to slow the breakneck pace of its economy, which has propelled the prices of steel and other raw materials to record highs:

China’s efforts to slow down its overheated economy have begun to pay off as the price of steel products for construction projects dropped 750 yuan (US$91) to around 3,440 yuan (US$419) per ton, or by about 17 percent, during the past six weeks.

A high-level official with the country’s influential State Development and Reform Commission predicted the price will continue to fall in the short term, attributing the drastic drop to improved macro-economic regulation, tightened money supply and administrative intervention.

A stronger US dollar and price drops of raw materials for steel products on domestic and overseas markets are also partly responsible for the decrease, the official said.

According to the information gathered from major steel product markets in 22 cities, steel prices rose by at least 1,000 yuan (US$121) per ton in the past year ending early March.

The country’s market demand for steel products began to fall in the first quarter, but output increased by 29.47 percent, leading to growth in inventories. Yet, the current steel price is still 30 percent higher than a year ago.

By early March, steel products for construction rose at least 50 percent to 1,400 yuan (US$170), and rising steel prices have spurred investment in steel plants and prices of raw materials and energy during January and February. Overall investment in the steel sector stood at 16.9 billion yuan (US$2 billion) in the two months, up 202 percent year- on-year, according to figures released by the commission.

The prices of iron ore, steel scrap and coke jumped by about 200 percent, 50 percent and 40 percent year-on-year, respectively.

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