Chinese experts call on steel industry to undertake a cyclic adjustment as some steel mills have started to scale down production due to continuous sliding in steel prices.

    At the 3rd China Steel Raw Materials & Fuels Summit held in this coastal city of Fujian Province, East China, quiet a few steel mills said they have started to cut production.

    Currently, domestic steel price has fallen for seven consecutive weeks. Midsize and small steel mills that use spot ore for production are forced to shut down furnaces.

    A steel mill in Tangshan with an annual output of three million tons stopped the operation of two furnaces.

    Nanjing Iron & Steel Union Co., which ranks first in net asset yield in the sector and has annual capacity of 6.5 million tons, will cut steel production for September from scheduled 500,000 tons to 360,000 tons, a decrease of 30 percent, said Yang Siming, general manager of the company.

    Yang said they had no choice and, given the current price, the company would suffer up to 800 yuan/ton in long steel products alone.

    The profit in the company fell from 400 million yuan in July to 300 million yuan in August.

    Since August, there have been concerns about sharp decline insteel prices. At present, reinforced steel price has plummeted by 10 percent from its peak in June and HR steel plate and hot-rolled steelprices dived by 15 percent.

    Some experts hold that this round of sliding steel prices is mainly attributed to weakening demand. Given slowdown in economic growth, steel industry may undergo cyclic adjustment.

    Right now there has been no remarkable decline in investment inreal estate market, which contributes to 50 percent of consumption in the steel sector.

    However, housing price and sales are both falling down. Views diverge as to weather the government to launch rescue policies to keep housing price stable.

    But one thing is for sure, said Zhu Baoliang, chief economist with the Economic Forecast Division of the State Information Center, that the current policy would not be reversed if economic growth keeps at nine percent.

    Zhu heeded evident overcapacity of the automobile sector, another major driver for consumption.

    The slide of automobile and housing sectors indicates the trend of a slower pace has occurred to China's economy. Once the economy falls below 9 percent in 2009, the adjustment of the steel sector may dragon to the year 2010.