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August 24, 2009

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Steel prices fluctuate wildly

CHINA'S steel prices went through a roller-coaster ride of gains and declines within 20 days, with the biggest tumble at 20 percent, according to figures from the country's industry information provider.

Steel prices plunged from this year's record high early this month, a culmination of price increases since late last month when big steel plants raised prices.

Prices of deformed steel bars fell from their highest level of 5,000 yuan (US$735) per ton to 4,200 yuan, a decline of 16 percent, and steel wires saw the biggest tumble of 20 percent from 4,850 yuan per ton to 3,900 yuan as of last Wednesday, according to, the industry information provider.

Xu Xiangchun, an analyst at Mysteel, said the price hike by major steel plants was the last straw weighing down on the steel market and triggering the price slump.

Traders who sold stockpiles to cash in on earlier price rises also helped drive the prices lower, Yao Hongchao, president of a Henan steel trader, told the China Securities Journal.

Other traders suffered huge losses as prices slumped, while steel producers had significantly reduced stockpiles when prices were high, said Zhang Ping, an analyst with Umetal, another industry information provider.

The steel price adjustment may continue for some time, said Zhang, as stockpiles continued to rise on lower trade and supply.

Zhang said the price change was a technical adjustment at first, but it could be compounded by a change in macro policies, such as a slight adjustment in bank credit, and a bearish run of the stock market that may impact investor confidence.

Xu said there were signs that steel prices had plunged too much and that they may still drop.

Zhang forecast prices of deformed steel bars could stabilize at 3,700 yuan per ton before falling.


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