China’s economy is ‘generally stable’ despite some downward pressure in the short term, according to the latest China Iron and Steel Association  (CISA) report. There is still room for growth in urbanisation and infrastructure and steel demand could increase slightly over the rest of the year. However, oversupply means steel prices are likely to fall further.

During January-August this year all steelmaking raw material prices monitored by CISA fell steadily, with iron ore hitting around $90.85/t by late-August. A slowdown in domestic investment, combined with the massive increase in iron ore imports, was to blame CISA says.

Fixed asset investment was up 16.5% year-on-year for January-August, down from a 17%-increase in January-July, while growth in real estate investment was 13.2%, down from 19.3% in the same 2013 period. New housing construction also fell 10.5% y-on-y, CISA notes.

In the face of these weak demand indicators, supply growth also slowed but not enough, CISA fears. China produced 68.91 million t of crude steel in August according to the National Bureau of Statistics. This was up 1% from July and equated to daily output of 2.22mt of crude.

Steel market inventories, however, have continued to decline. Market inventories reached 12.02mt on 12 September, down 2.59mt from the same time in 2013 and down from 12.33mt at the end of August, CISA says.