Steel prices rebound after slump

China's steel prices rebounded dramatically this week due to the economic stimulus policies announced by the government recently, after the market was gloomy for 13 months, analysts said on Thursday.

Average steel prices were at 3,810 yuan ($604) a metric ton on Thursday, 259 yuan more than at their lowest level on Sept 7. Steel prices increased 7 percent in less than half a month.

"Previously, steel prices fell 30 percent in 13 consecutive months," said Xu Xiangchun, information director of mysteel.com, a steel industry website and consultancy company. "The policies of the central government to keep steady economic growth have boosted investors' confidence, which led to the rebound in steel prices."

Prices soared from 3,628 yuan a ton on Sept 13 to 3,810 yuan a ton on Sept 20, up 5 percent in a week, according to data from mysteel.com.

Xu said recent policies from the National Development and Reform Commission helped the market recover.

"Investors believe that the central government will not allow the economy to keep falling," he said. "Because of the price rebound of steel products, the prices of raw materials including iron ore and coking coal have been increasing too."

Average iron ore prices increased from 803 yuan a ton on Sept 10 to 893 yuan a ton on Thursday, up 11 percent in 10 days, according to mysteel.com.

At the very beginning of the month, the price of imported iron ore with 62 percent ore content dropped to less than $90 a ton, which was a record low.

Nevertheless, industry insiders worry that the increase in steel prices will not continue for a long time due to the unbalanced supply and demand in the industry.

Xu said the prices are expected to fall after a while, but not to their lowest levels.

China's average daily steel output from large and medium-sized steelmakers was 1.57 million tons during the first half of the month, up 2.89 percent compared with late August, according to a recent report from the China Iron and Steel Association.

The association estimated that the national average daily output was 1.89 million tons during the same period.

"Downstream demand for steel products didn't see an obvious increase," the report said.

"Although the prices are rising, it seems that most buyers are still waiting to see how the market will go," said Liang Yanhong, analyst at mysteel.com. "Steel prices may continue to increase in the short-term, but how long the increase can continue still depends on the downstream market."