China's steel and iron market is faced with severe price fluctuation in the rest of this year as steel demands and exports continue to weaken while steel production expands by a large margin.

    Statistics show investment in fixed assets in the first half of this year climbed 14.8 percent to 5.8 trillion on year, down eight percent from a year ago.

    On the back of the growth, China Iron and Steel Association estimated the whole year steel output might hit 540 million tons, up 10.3 percent over 2007.

    Under such circumstances, steel price is heavily challenged in the second half because a number of new plants in China will be put into production and surging resources products prices push costs for steel factories upward.

    In addition, steel stock and forward trading also exert huge influence on steel products' prices, and steel stock index in August fell by 60 percent.

    As of August 25, China's biggest steel maker, Baosteel's price-earning ratio reached 6.88 and Wuhan Iron and Steel Co., Ltd., 6.09.

    Most listed steel producers' price-earning ratios have dropped totwo.