China steel market would face more difficulties in the last quarter of this year and the next year, said Wu Xichun counselor of China Iron & Steel Association.
"The massive overcapacity would worsen, along with the low overseas demand due to global financial storm.” he said.
Wu said, “Total investment in steel projects under construction still hit as high as CNY 340 billion this year though investment growth in the sector fell to 3 percent from last year 23 percent which would result in at least 50 million tons new capacity in 2010 and send China total capacity up to 710 million tons.”
He also added that demand cannot maintain the same growth with mounting up supplies. Steel consumptions in January to August 2009 increase by 53.51 million tons or 16.8 percent YoY from a year ago.
However, it was mostly driven by numerous infrastructure projects boosted by government stimulus a temporary demand support. And steel demand cannot sustain the high growth in January to August as the government led investment is slowing down.

The world largest coal user and producer China cut imports of the fuel for a second month after global costs rose and domestic supplies increased.
Data from the customs office showed that purchases fell 15 percent to 11.77 million tons last month from July. Imports are still higher than the 3.79 million tons reported a year earlier. According to recent data, the country's net coal imports fell to 9.86 million tons in August from 12.66 million tons in July after exports rose 54 percent to 1.91 million tons.
According to the globalCOAL NEWC Index imports declined for the first time MoM this year in July after the country reopened small mines to meet rising demand spurred by an economic recovery. Shipments also fell as the cost of overseas supplies rose.
A coal analyst with Guotai Junan Securities Ltd in Hong Kong said, “Overseas shipments of the fuel have no price advantage over domestic coal these days which will curb the country imports. On the other hand, it seems demand is rebounding quicker than we've been expecting.”
He said that including freight charges of about USD 20 per ton, overseas coal will still cost more than local supplies.
The government has been accelerating the pace of mine openings after completing safety checks and consolidating as many as 10,000 small pits that had an annual capacity of 300,000 tons or less.

China steel industry should become stronger and more competitive by obsolete capacity elimination, M&As, mill relocation, structure adjustment and technical advancement on the premise of stable or decreased capacity.
According to a report, Beijing will not approve or support any pure steel capacity expansion projects.
As per report, the country will also stop approving coke and calcium carbide projects planned for pure capacity expansion in the following three years. Projects in violation of industry admittance will also be banned.
The central government has vowed to strengthen industry admittance, enhance environment supervision and implement differential financial policies, as well as to dampen unqualified projects by loan and financing restrictions.
Besides steel sector, it has also announced restrictions for some other industries facing overcapacity, including cement, plate glass, polycrystalline silicon and wind power generation.

Steelmakers in China, the world's largest producer, will be forced to cut output in the next two months as prices continue to decline because of oversupply, Jiangsu Shagang Group Co. said.
Prices may drop by between 5 percent and 10 percent for the rest of the year, Shagang Chairman Shen Wenrong said. The Zhangjiagang, Jiangsu province-based steelmaker is the nation's fifth-largest mill and the biggest maker of steel wires and rods used in construction.
Steel prices in China have dropped 25 percent since reaching a 10-month high in the first week of August, as overproduction offset rising demand created by government spending. Wuhan Iron & Steel Group, China's third-biggest, may carry out annual maintenance which will reduce output, Wuhan General Manager Deng Qilin said.
“Prices will drop further until a large number of the steelmakers record losses,” Shen said. “Overcapacity in flat products is worse than long ones. That would hurt bigger steelmakers because they are the major producers of flat products,” he said. Flat steel products are used to make automobiles and appliances and long products are used in construction. Shagang is privately owned.
China's demand for long steel products, including heavy rail and wire rods, rose by 20 percent because of the government stimulus spending, the National Development and Reform Commission said. The demand gain is a “temporary reaction” to the stimulus and China still faces overcapacity in the steel industry, Chen Bin, head of industry coordination at the national planner, said. China is spending $586 billion on a stimulus program, spurring demand for steel used in public works building. Mills in China may have the capacity to produce 700 million tons of steel a year, according to Wuhan's Deng. Chinese demand may expand by 19 percent this year to 526 million tons, the World Steel Association predicted this week.
Still, China may spend more on roads, bridges and railways in the next two years as part of the stimulus spending, which will help support demand for steel, Shagang's Shen said.
“Less than one third of government spending will be used this year,” Shen said. “In the next two years, the investment growth won't slow down.”.

China's leading steel producer Baoshan Iron and Steel Co Ltd has slashed prices for its major steel products by 9-13% for November sales versus the October prices, industry consultancy Umetal said.
The steel major would cut the price of its major hot-rolled steel coil by $58.61 per ton, while reducing its major cold-rolled coil price by $102.3 per ton, the consultancy said.
The company's price of the major hot-rolled steel coil would be $ 577.40 a ton for November, while the price of the company's major cold-rolled steel coil would be $ 684.91 a ton, said the report.

BHP Billiton and Rio Tinto Ltd , Australia's top two iron ore miners, have scrapped a plan to jointly market iron ore from a proposed Australia joint venture that has drawn criticism as being anti-competitive.
The idea of the two mining giants -- fierce competitors in the iron ore-rich Australian outback -- joining forces particularly rankled Chinese steel mills, the world's largest consumers of iron ore, who saw the alliance as anti-competitive. Under the terms of the agreement, up to 15 percent of the joint production was proposed to be sold jointly.
Rio and BHP in a joint statement said production now would be marketed separately.
"The two companies believe that this change will clarify the nature of the JV for customers and emphasise its focus on realising significant production and development synergies," the statement said.
Rio Tinto spokesman Tony Shaffer declined to comment on whether the companies dropped the joint marketing plan partly to help secure competition regulators' approval for the production joint venture.
"We are engaging with regulators. It's in the early stages," Shaffer said, adding that the companies would file a formal submission to regulators like the European Commission only after they sign their final agreement, expected by December 5. Rio had scrapped a proposed $19.5-billion tie-up with Chinese metals group Chinalco two weeks prior to announcing the deal with BHP on June 5. Rio lifted its 2009 iron ore production guidance by 5-7.5 percent to between 210 million and 215 million tons. BHP and Rio said they expected to finalise the joint venture agreement on schedule.