China steel body sees prices stabilising, helped by crackdown on speculation

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A worker walks past steel rolls at the Chongqing Iron and Steel plant in Changshou, Chongqing, China August 6, 2018. Picture taken August 6, 2018. REUTERS/Damir Sagolj/File Photo

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BEIJING, May 24 (Reuters) - Chinese steel prices are expected to stabilise as demand softens in the near term and a round of government inspections aims to stop speculation and irregularities, the China Iron and Steel Association (CISA) said on Monday.

Prices in the world's top steel producing country surged in April and have fluctuated this month, driven by robust domestic demand, rising raw material costs and a global easing of liquidity, according to the CISA.

China's steel price index jumped 9.25% to 148.88 by the end of April compared with a month earlier, data compiled by the steel body showed.

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CISA said it expected demand to weaken over the coming period as construction activities slow during the rainy season while the autos and home appliances sectors are also entering their off-peak season.

Production levels at steel mills remain high, and growing unwillingness by downstream users such as the shipbuilding industry to keep paying the high prices seen since April is also expected to put downward pressure on prices.

"From the domestic situation, the supply and demand sides of steel products did not show overall or trending changes, steel prices do not have the basis for sustained and substantial increases," CISA said on its official WeChat account.

It also cited a planned government crackdown on market irregularities as a factor in the expected stabilisation of prices. read more

China's market regulators warned industrial metal companies to maintain "normal market order" during talks on Sunday, with the main economic planning body saying that firms "should not collude with each other to manipulate market prices ... hoard goods and drive up prices". read more

China's steel rebar and hot rolled coils futures on the Shanghai Futures Exchange closed down 3.6% and 3.9% respectively on Monday after the announcement from the economic planner. read more

Benchmark iron ore futures plunged 5.2% at 1,064 yuan ($165.48) a tonne at close.

($1 = 6.4297 Chinese yuan renminbi)

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Reporting by Min Zhang and Shivani Singh, editing by Estelle Shirbon

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