For fear of possible stricter government macro control policy in the latter half of the year, China's steel sector saw steel prices taking a sudden drop.

The domestic steel price, which climbed from 3,000 yuan (US$375) per ton to 3,400 yuan per ton in the first half year, fell 10 percent in the last two weeks, Xinhua-run newspaper Economic Information Daily reported on Friday.

In Shanghai, the price of 6.5 mm wire steel dropped from 3,430 yuan (US$429) per ton on June 23 to 3,100 yuan (US$388) per ton on Thursday.

Liu Huiru, an analyst with the Consulting Department of the China Iron and Steel Website, attributed the price drop mainly to a lack of confidence in the market.

Some industry insiders suspect that the central government may take more serious measures to curb excessive investment and slow down the country's overheated economic growth.

Statistics from the National Bureau of Statistics showed that China's GDP grew by 10.2 percent in the first quarter and the urban fixed asset investment growth rate reached 30.3 percent in the first five months.

Although the GDP growth rate for the January-June period is not yet available, it is widely believed the rate will be higher than the 9 percent target set by the government early this year.

Steel dealers say the state macro control policies on the real estate sector could exert a negative impact on the property sector's demand for iron and steel in the remaining months of the year.

At the same time, domestic steel supply will continue to increase while export demands may decline due to disputes with trade partners and a reduction of the tax rebate policy by the government.

Between January and May, China consumed 33.1 million tons of steel. It is expected the nation's steel consumption will grow 13 percent this year, far below the 30 percent increase rate of crude steel output.

There is little possibility for the price to fall sharply as there was no steep steel price rise in the first half of this year, Liu said.

Departments concerned also hope to maintain a stable steel market and do not want to see the price to fluctuate dramatically.

It is predicted that the implementation of the country's tax rebate adjustment policy, which was worked out in June, might have already been postponed.

(Xinhua News Agency July 8, 2006)