China's steel market is likely to remain weak and prices depressed until next year, the country's biggest steel producer said yesterday, in what appeared to be a warning shot to mining companies in the midst of the annual iron ore price negotiations.

Wu Dongying, director of Baosteel's Economics and Management Research Institute, said the Chinese steel industry “will remain in a valley and prices will fluctuate at a low level” in spite of Beijing's Rmb4,000bn ($586bn) economic stimulus package, which is expected to boost steel demand in the second half.

Mr Wu comment's, echoed by other industry executives and traders in China, came yesterday as global miners Rio Tinto, BHP Billiton and Vale of Brazil negotiate with Baosteel and the China Iron & Steel Association over the annual price of iron ore for the year which started on April 1. Iron ore is the main input into steel.