A significant drop in demand for Chinese steel in the market has pushed its prices to as low as the cost of cabbage worrying manufacturers and sellers that annual steel consumption may shrink tremendously for the first time in 19 years.

Steel products that are widely used in construction such as grades of rebar plunged to Rmb 2,600 ($424) a tonne in Chinese markets this week  equivalent to the retail  price of cabbage,

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Reports said Chinese steel consumption has had its peak for years with the rise in demand for supermarkets, train wagons, refrigerators and greenhouses that  are now being enjoyed by the Chinese.

But now,Industry experts said the demand for steel is now falling sharply even as China's economy is enjoying a major boost .

Li Xinchuang of the China Iron and Steel Corporation, said that the plunge in steel demand "is a long-term trend." He said that CISA records showed that the demand for steel fell in both July and August compared to the same time last year.

Li said the decline in  steel demand  this quarter shows the slow  movement happening in the housing industry today. He said if  the decline continues until the last quarter, this will be the first time in the steel industry that the first year consumption has shrunk since 1995, the year when China was recovering from inflation.

"All the indicators we look at show the fourth-quarter economic recovery is unlikely to be strong," said Song Chunlei, vice-director of steel consultancy LGMI in Beijing.

Chunlei said mills all over the country, specifically Tangshan, the heart of the steel industry, are already bracing themselves for the low steel demand on  the fourth quarter this year and have decided to cut production for the rest of the year.

Chinese steel manufacturers are expected to underperform in the broader economy as they expect the  Gross Domestic Product Data to show the weakest quarter since 2009. The GDP is expected to be released next week.

The manufacturers said there will be a shift in economic activity to other services sector, away from the steel and other heavy industries.

TagsCISA, steel, losses