Chinese steel industry faces increased oversupply pressure because exports are likely to continue falling in the second half of this year while growth in output may surge, an industry group said yesterday.

Although production will remain strong in the second half due to demand from China's heavy fixed-asset investment, weaker appetite from Europe, the United States, Japan and some southeast Asian nations could pull exports lower, the China Iron and Steel Association said.

"The contradiction between supply and demand is set to deepen over the remainder of the year as a result of fast rising production and falling exports," said CISA, which represents major mills in China.

Despite the overcapacity, long steel products will benefit from strong investment in affordable housing and rural water conservation projects, CISA said.
But the situation for flat steel products, which are used to make cars and home appliances, could worsen, it added.

China's crude steel output rose 9.6 percent to 350.5 million tons in the first half, according to the National Bureau of Statistics. China exported 4.29 million tons of steel products in June, down 11 percent from May, data from the General Administration of Customs showed.

Steel stockpiles in 26 major segments of the domestic market fell 2 percent month on month to 14.32 million tons at the end of June, the fourth consecutive monthly fall, according to CISA. But June's decline moderated from the 5.2 percent decrease in May, indicating a slowdown in demand, it added.

Source: Shanghai Daily