China faces steel glut on oversupply

China, the world's largest producer and consumer of steel, is facing a severe glut recently due to increased imports and domestic supply, an industry expert has cautioned.

Oversupply of steel products has worsened in China's domestic market in the past two months, former president of the China Iron and Steel Association, Wu Xichun said.

The glut is not caused by insufficient demand, but by increase of net import and domestic supply, Wu was quoted as saying in the eastern metropolis, Shanghai by the 'China Securities Journal' yesterday.

The steel price drop in international and domestic markets since April this year was natural, and the competitions and merger among domestic steel firms will decide the country's steel market performance in the latter part of this year, he said.

In July and August this year, China turned from a steel net exporter into a steel net importer, the newspaper reported.

In August, China only exported 1.33 million tonne of rolled steel, down 0.87 million tonnes from June. The worsening steel oversupply in July and August has led to price falls in August and September, Wu said.

The problem is not on the side of demand, he said. In the first eight months this year, China's urban fixed asset investment grew 27.4 per cent, and in the first seven months, China's industrial added value increased 16.3 per cent, the paper noted.