“But China’s steel exports will surely resume downward trend soon, given poor overseas order bookings since April, and the contraction in overseas demand is unlikely to reverse for at least this year, given overseas efforts to curb inflation,” a market source said.

          “Oversupply in the Chinese domestic market is unlikely to be eased through exporting this year, as overseas demand seems equally weak,” another source said.

          Weak domestic demand in China led to a 22% year-on-year increase in finished steel inventories at Chinese mills and major spot markets as of May 31, according to the China Iron & Steel Association.

          However, China’s steel mills were reluctant to reduce crude steel production, in anticipation of steel demand recovery in June and July after China contains the pandemic.

          Some market sources believed steel mills were too optimistic about demand recovery.

          Any rebound in steel demand should be modest, as the uncertainty around the COVID-19 outbreak is slowing down China’s economic recovery, sources said.

          Other major factor weighing on steel demand recovery is sluggish consumption from the debt-strapped property sector, as this would continue to undermine demand from both the construction and manufacturing sectors, they said.