It is reported that China largest steelmaking province says the sector has fallen into extreme depression and is unlikely to recover for some time as the country steel mills undergo a long-awaited restructure.
The comments come as iron ore stock piles hit historic highs with Beijing-based analysts predicting that low prices will continue for many months as Chinese steel mills cut production and struggle with industry overcapacity.
The Metallurgy Association of Hebei Province said "The steel industry in Hebei has fallen into extreme depression. Orders to steel factories are dropping sharply and the stock of products keeps increasing with operational pressure on steel factories growing further."
Mr Wang Dayong secretary general of the association said the lower prices and profits would not change in a short time while the environment for China mills to restructure was still developing.
China has steel capacity of about 850 million tonnes, much of it created during the massive government stimulus of 2009-10. But its mills produced only 680 million tonnes of steel last year and are forecast to produce 700 million to 720 million tonnes this year.
But the general economic malaise and the choking off of demand in the real estate sector is starting to bite.
The association said "Though the central government has issued certain stimulus with financial and monetary policies, the slump in demand has not changed."
The association said "Orders for August have dropped 13.3% from the previous month and the steel price has decreased within a large range so more steel mills have put their furnaces into maintenance. Steel factories are reducing their ore stockpiles. The purchase of ores is being reduced, from both domestic producers and abroad."
This slackening in demand has combined with an increased supply of seaborne iron ore from Australia and Brazil.