SHANGHAI, Oct. 26 (SMM) – Chinese steel markers are lowering their output recently as tight monetary policies have led to slower growth in the real estate sector and the whole China economy as well. Prices of steel products and raw materials for these products are expected to drop through to the year-end. Profit of China’s steel industry is expected to hit its lowest level during the fourth quarter, and will see a slight rebound during the first quarter in 2012.

As tight monetary policies continue, and with reduced manufacturing activities caused by weaker construction and export demand, the 1.9 million mt crude steel produced in September is surely excessive for domestic demand. Meanwhile, according to Steelease sources, bank loans for Shanghai steel traders have already been stopped. With mounting capital pressure, steel stocks at these traders will also flow into the market.

As a result, steel output will be lowered for following months, and steel as well as its raw material prices will drop continuously. Production halts, therefore, will increase in the near future, but mainly at large steel producers which are less sensitive to such halts.

Compared with slight decreases in output in October, crude steel and steel product output will drop significantly in November and December as both large and small steel producers may shut their blast furnaces. Raw materials prices therefore will drop further on a weaker demand.