Warnings flash for China’s steel market

Rising output: Workers walking in a warehouse of a steel plant in Handan, China. Steel output in the world’s largest supplier may see a further increase this month as more furnaces are fired up, according to Fitch. — AFP

BEIJING: Warnings are stacking up fast after China’s eye-popping steel rally. Fitch Ratings Inc said prices lifted in part by heightened speculation are destined to slump, while a bank in Singapore flagged the risk of a boom-bust cycle reminiscent of China’s equity market.

The rapid advance wasn’t sustainable as mills were expected to bring back idled capacity, raising supply, Fitch said in a report. Price gains have been driven by a seasonal recovery in activity that has been exacerbated by increased speculation in the futures market, according to analyst Laura Zhai.