It is reported that Mr Yao a marketing manager with Henan Zhongtian Iron & Steel Co Ltd a steel provider for companies involved in infrastructure construction, wind power and shipbuilding, was caught in a dilemma recently as steel prices kept sliding over the past three months.
He said that "It''s a hard decision since the more steel we sell, the more money we will lose; however, if we don''t sell it, the stock will be a pile of rust.”
He added that, he will lose over CNY 100 on every single tonne of steel he sells.
Mr Yao said "Many clients choose to wait and see because they don''t know where the market will go and some of them just demand deeper discounts."
Mr Su Lifeng an analyst with Guoyuan Securities said so far domestic steel prices have dropped for 12 weeks in a row with some categories losing CNY 1,000 per tonne.
Mr Yao said "Things changed so fast. The market was full of optimistic sentiment before the second quarter. Steel price soared more than CNY 1,000 per tonne from February to April and our net profit in the first five months this year soared 17.6% compared with the first five months in 2009."
Mr Su said "The government stimulus package ignited the growth of steel downstream industries such as real estate, automotive and home appliances. That''s the main reason the steel market performed well in the first quarter this year and also in 2009."
He said that "The bumpy iron ore talks threw a wet blanket on the buoyant market sentiment and the expected iron ore price rise will further erode steelmakers'' profits."
According to China Iron and Steel Association Mr Yao''s awkward situation is merely a mirror of what is happening across the domestic steel industry. By the end of May, steel inventories in 26 major steel markets across China reached 15.78 million tonnes up by 2.3% from April.