China's major steel mills report falling prices in tune with market sentiment

Despite the surge in Chinese steel prices in April, large factories in that country remain realistic and consider maintaining such a price questionable. It would seem that the 2% rise in the last two weeks is encouraging, but there is a slight drop in prices today.

China's two main factories, Anshan and Baosteel, say they can lower the price of flat products, citing sluggish demand in the segments. Baosteel wants to reduce the price of cold rolled coils by RMB 150 per tonne and hot rolled strip by RMB 100 per tonne. WISCO lowered its cold rolled coil prices by 117 yuan per tonne. Anshan is also lowering prices for shaped pipes .

Typically Baosteel sets the tone for the overall steel market, and its decision to cut prices for May reflects the weakness of the Chinese steel market, which has been hurt by oversupply and slow demand. The Chinese steel market is saddled with unrelenting production. Despite capacity cuts, it rose 2.2 percent from a year earlier to 70.3 million tonnes in March.

Steel production for the world's largest producer and consumer was 2.0267 billion tonnes in the first quarter of this year, up 2.4 percent over the same period last year. The market continues to hesitate between hope and despair after the announcement of half of the government stimulus packages.

The recapitalization allowed for banks will put additional pressure on a currency that is already suffering and could put more pressure on the pricing of China's competitors. Only an increase in rail infrastructure spending can generate demand for steel.