Reuters reported that China steel industry may end up losing money next year as excess supplies weigh on prices.

Chinese mills have been cutting prices since early August due to massive supplies of steel in the physical market, putting them back under pressure despite having just moved into the black in May after a half year of overall industry losses due to a slowing economy.

Prices in the physical Chinese steel market have fallen more than 20% since early August as a steady rebound in demand lags the more rapid rise in supply. Steelmakers eager to take advantage of China economic recovery have boosted domestic production to record monthly levels.

Mr Han Weidong deputy chief of Hebei Iron and Steel Group market section said "Stockpiles of construction steel products at steel mills have returned to a level last seen at the end of last year a substantial amount. He said that there is a risk that China's steel sector will return to an overall loss in 2010."

Han added that China domestic steel demand was unlikely to reach 600 million tonnes next year, while an expected reduction in bank lending in 2010 could hurt both end user demand for steel and expansion at steel mills, restraining growth in iron ore consumption.

A senior executive of the China Iron and Steel Association said on Friday that China's apparent steel consumption was expected to rise about 26% or about 120 million tonnes this year although this was partly due to rising inventories.

(Sourced from Reuters)