The consultants also said that oversupply had been masked by a sharp rise in steel exports, resulting in distorted statistics.

Higher prices on overseas markets have helped China become a net exporter of rolled steel earlier than expected.

The statistical bureau said between January and October, China exported 32.8 million tons of rolled steel, up 91 percent on the previous year. The exports were 17.3 million tons more than imports for the 10-month period, compared with a net import of 4.77 million tons a year ago.

Any price drop on the overseas markets would leave China's steel industry vulnerable to overproduction as exports are reined in.

Wu Wenzhang, an industry analyst in Shanghai, said steel exports were conducive to realizing a balance between demand and supply at home.

But Baosteel's Xu Lejiang countered that it was more important to raise the threshold of the industry, concentrate production and make structural reforms.

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