Yang predicted that stock price weakness would be short term.

Analysts at CITIC Securities agreed and said that the rise of spot steel prices would raise the valuation of steel companies.

China's steel exports jumped 110 percent to 43 million tons, while imports fell 28 percent to 19 million tons in 2006. More than 60 percent of the exports went to the Republic of Korea, the European Union and the United States.

"The large steel price gap between the domestic market and the international market contributed to the increasing steel exports," said Luo Bingsheng, vice-chairman and secretary-general of the China Iron and Steel Association. Luo said that China's steel industry was often threatened by international anti-dumping complaints, but CISA continues to talk with international steel associations to relieve trade conflict. The nation adjusted tax rebates three times since 2005, including a reduction on some selected steel products from 11 percent to 8 percent last September.

"Steel exports in 2007 are expected to be lower or equal to the amount in 2006," Luo added.

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