Capacity glut alert as steel prices rise

CHINA'S steel prices rose again in October but the China Iron and Steel Association warns steel makers to be cautious of overcapacity which will erode their profit margin.

The China Steel Price Index in October was 105.4 points, up 2.87 percent from the previous month, CISA said yesterday. The growth was 1.96 percentage points higher than September's.

"As fixed-asset investment increased to boost economic growth in China, the demand for steel has rebounded since September and is expected to continue in November," CISA said in a statement on its website.

The total inventories of five main steel products, including hot-rolled coil and rebar, in 26 major markets fell 2.8 percent from the end of October to 12.08 million tons last Friday, according to CISA.

But it also warned that cold weather in China's northern regions and growing supplies will weaken the demand and further weigh on prices because of possible overcapacity as some suspended capacities resumed.

Ma Guoqiang, general manager of Baoshao Iron and Steel Co, the country's biggest listed steel maker, has warned that margins will be squeezed by the rising iron ore and coal prices.