Supply-demand mismatch continues to dampen steel prices

Steel prices in China continued to spiral downward in July as market supply far exceeded demand, latest data from the China Iron and Steel Association (CISA) revealed on Monday.

The CISA China steel price index came in at 62.73 by the end of July, down 5.94 percent from a month earlier. The index marked a drop of 31.56 percent from a year ago, as no significant improvement in the supply-demand mismatch was seen, according to the association.

It attributed the weak demand to the prolonged downward pressure on the broader economy, which posted a 7-percent growth in the first half of the year.

As the government's pro-growth policies such as increased infrastructure spending gradually filter through, the CISA expects improving steel demand in the latter half of the year. But a substantial rebound in prices is unlikely due to high output and a severe export outlook, it added.

Earlier statistics showed China's crude steel output totalled 476 million tonnes in the first seven months of 2015, down 1.8 percent year on year, while apparent consumption went down 5.2 percent to 420 million tonnes.

The Chinese government has been at pains to digest production gluts from an investment boom spawned by generous subsidies in the past few years that saw producers in "favored" sectors, including steel, expand rapidly with little regard to real market demand.

To gradually solve the problem, the government has banned new projects in steel, cement, electrolytic aluminum, flat glass and shipbuilding before 2017. Endi