Panic has sunk in the Chinese steel market as the steel prices dipped further by 1% on Monday. Diffidence had gripped the futures market also as traders and stockiest were faced with piling inventory and slow off take. Decline was uniform across all products.

With the Spring Festival not going far away, downstream demand hasn’t recovered, pushing up traders’ steel inventories, which, together the sluggish futures market caused steel traders’ pessimistic sentiment to grow significantly.

In the aftermath of rollicking production by steel mills on pumped of sentiments before Spring Festival inventory was expected to be absorbed by the hunger for construction and speculative drive. However it seems the expectancy has been stretched too far.

However silver lining is still distinct with the warm weather yet couple of weeks away. Intervening pressure interspersed with mild volatility can be taken in the short term provided there is no major policy hiccup.

• [Editor:editor]