New projects a boon for steel firms: expert

Domestic steel prices will see a rise of at least 400 yuan ($63.34) per ton by year-end compared with the price level in early September, an expert forecast Monday, following the government's recent approval of a series of infrastructure projects.

Prices of some steel products have already increased by around 300 yuan per ton over the past week. "Steel prices may continue to rise, given the recent favorable news," Ma Li, a senior analyst at Beijing Lange Steel Information Research Center, told the Global Times.

Since September 5, the National Development and Reform Commission has announced the approval of more than 50 infrastructure projects, worth a total of 1 trillion yuan. And several provincial governments have also announced plans to spur economic growth, which are all likely to boost steel consumption.

Meanwhile, the US government announced a third round of quantitative easing last week, a move that has ignited expectations of a rise in international commodity prices.

China's steel industry has seen a continuous slump this year. Steel prices have dropped by 25 percent to some 3,000 yuan per ton compared with the beginning of the year.

Wang Xiaoqi, an official at the China Iron and Steel Association (CISA), said last month that profit in the sector has fallen to 1.68 yuan per ton in the first seven months of the year.

Other experts are not as optimistic as Ma, given that the sector is still burdened by overcapacity and large inventories.

Data released Monday by the CISA showed that the total inventory of China's major steel producers reached 12.06 million tons by early September, up 40.7 percent compared with the beginning of this year.

"Steel prices may fluctuate around the current level in the future, but clearly total demand is not enough to support a major price increase in the short run," Ma Zhongpu, chief analyst at commodity information portal chinaccm.com, told the Global Times.

"Considering the large production capacity, I think steel prices will still drop," Zhou Wei, another analyst at Beijing Lange Steel Information Research Center, told the Global Times.