Since shortly after the conclusion of the Olympics, numerous steel suppliers have been contacting me regularly with new enquiries and to update me with new prices. Some of these are large steel traders in Anshan and Tangshan, and some are steel mills of pipes and hot-rolled coils, to mention a few. This is definitely abnormal when compared to a year ago, when Chinese steel mills were in full capacity and shipping out 62 million tons to destinations all over the world. At that time, those export managers were so busy signing contracts that it took weeks to reach them to get quotations.

In early October after the Chinese National Holiday, Baosteel announced a cut in steel production for the succeeding three months. The other steel makers, Shougang Group, Hebei Iron & Steel Group, Anyang Iron & Steel and Shandong Iron & Steel had all also agreed to cut production by up to 20%. In addition, many other steel mills reduced output under the guise of annual maintenance. Taisteel, the largest stainless steel mill, cut its production by as much as 50% and plan to make further cuts in November. Yet due to weak demand and the strong Renminbi, international buyers are still unable to digest China's output. At present, according to MySteel, salaries for workers at Angang iron-making plants have been cut by 35% and for affiliated plants by 50%. At Baosteel, the total amount for salaries paid has been reduced by 10%, and Shougang have halved the bonuses paid to their employees.

We recently got offers from iron ore suppliers in South America and chrome ore mines in South Africa, yet these once best-selling products are now stacked in China's ports. When we approached the Chinese mills, we found their demand and price expectations had dropped significantly. Traders are simply not willing to sell at such a low price, and ominously, they don't expect to see a price rebound anytime soon.