According to statistics by China Iron and Steel Association, the inventory of five typical steel products in 26 major cities stood at 15.78 million tonnes by May end equally 5.5 folds as much as that in 2008 or 1.8 folds as much as that in 2009.
21st Century Business Herald quoted a Chinese market player as saying that “The bottom must be lower than that in 2008 provided there is a second, because the current inventory is several times as much as that in 2008."
Another player added that “It is manifested that what the astronomical credit of last year promoted is not consumption of steel, one of the original targets of the impetus package, but the steel production.”
Quite a number of analysts think that those steel companies which experienced slump in stock market such as Valin Iron and Steel Co Ltd Anshan Iron and Steel Co Ltd and Baosteel Iron and Steel Co Ltd are likely to see bottoming out in later terms because their Price to Book Ratios have come close to the breakeven point.
The question is how long the margin of safety can hold on when outlook is so drearier than in 2008.
Mr Yang Baofeng steel analyst with Orient Securities said "With the coming of low season in rainy spell and hot summer, China domestic steel market fall is getting faster. HR drops 4.6%, CR and medium plate 2.7%, rebar 3% and wire rod 1.4%, based on Mysteel monitoring and the long held popular opinion of correction now has turned to a dominant consensus of declining momentum."
Mr Gao Shanwen chief economist with Essence Securities, authority on macro economy research at home said the macro economy is now in the final stage of cyclical economy which is mainly characterized by badly overcapacity, insufficient effective demand and new economic growth point yet to be found.