China's domestic steel prices hit their lowest level in 20 years

According to industry sources, China's steel prices are at their lowest in more than 20 years. The composite price index for eight steel products compiled by the China Iron and Steel Industry Association (CISA) fell 65.28 points last Friday. The index is based on 1994 base prices, which means prices are now nearly 35 percent lower than they were 21 years ago.

While the association had not yet started compiling regular data in 2001, current prices were already considered lower than 1999, when the industry was hit by the Asian financial crisis. Last year, when the index fell to 95, CISA general secretary Liu Zhenjiang said it was already the lowest level ever. Some analysts say that the free fall in prices is not even nearing the end, and this threatens the survival of small metallurgical enterprises. China's steel demand is expected to take another hit as construction slows down over the summer, forcing mills to cut production.

China's steel production fell by almost 2 percent from January to May 2015 from a year earlier, while consumption of steel products declined by 5 percent over the period, according to CISA data. A spokesman for the state-owned iron and steel works said the biggest problem is low demand, but even worse demand is expected in the winter, and some small steel mills have already closed, and there is concern that this situation could become permanent.

In addition, metallurgical plants in China continue to close, violating environmental standards of environmental pollution. Therefore, in the current situation, large steel producers have a better chance of survival, which are able to provide efficient production technologies that allow them to continue to generate profits and comply with strict CO2 emission standards.