Chinese steel prices are likely to weaken in the second half as supply continues to outstrip demand, a senior executive with Baoshan Iron & Steel , the country's biggest listed steelmaker by market value, said on Monday.
Overcapacity in China, which produces nearly half the world's steel, has thinned profit margins of domestic steelmakers, limiting the impact of any recovery in demand. Baosteel reported a 61 percent drop in first-half earnings.
With around 300 million tonnes of surplus steel capacity in China - equivalent to nearly twice the output of the European Union last year - Beijing is implementing measures to end the glut including curbing credit access to the sector.
Chinese steel futures have lost about 8 percent so far this year, but have been recovering since June, with demand from end-users picking up ahead of September and October, when demand is traditionally strong.
The drop in steel prices has similarly dampened appetite for raw material iron ore, with spot prices .IO62-CNI=SI down around 4 percent this year.
China's economy is showing clear signs of stabilisation, helped by policy support and some improvement in global demand, the state statistics bureau said on Monday.
However, worries over a supply glut means margins will remain under pressure.
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