Steel sector faces long-term recovery

Finished steel prices fell 17.22 percent from January 2 to September 2, according to data from industrial information provider xb969.org.

Experts predict that steel product prices will continue to slide due to shrinking demand and excessive stockpiles. There are several reasons why. The steel industry has a severe overcapacity problem. Currently, domestic steel makers produce about 1 billion tons per year, even though there is demand for only 500 million tons. The sluggish real estate market has also hurt the steel industry. In addition, July's economic data came in lower than expected, which shook investor confidence in the outlook for the steel market over the next few months.

Banks have also clamped down on credit offered to steel companies, forcing many to sell off products at discounted prices to generate cash.

Generally speaking, it will be difficult for the industry to recover in the short term. In the face of fierce competition, large steel companies need to transform themselves by upgrading their technology and improving their management practices. Otherwise they risk losing out.