China's steel sector might have lost up to 49.6 billion yuan ($7.25 billion) in the fourth quarter as prices plunged and inventory built up, an industry association said.

 

An official of China Iron & Steel Association (CISA), speaking on condition of anonymity, said that out of 71 large and medium-sized steel producers the group monitored, 62 percent had losses that totaled 29.1 billion yuan in December 2008.

 

The companies lost 7.77 billion yuan and 12.77 billion yuan in October and November, respectively, according to CISA.

 

"The weak performance was due to sagging demand because of the global economic crisis, which resulted in inventory build-ups," said Hu Yanping, an analyst with the Beijing-based Umetal, a steel information consulting company.

 

Angang Steel Co Ltd, one of the country's top three steel producers, said in late January that its unaudited losses reached 4.83 billion yuan in December 2008. It attributed the loss to steep prices falls and slow inventory movement starting in the second half of last year.

 

But there are signs of returning confidence in the steel sector, with prices rising since November, according to Umetal. Construction steel prices reached 3,850 yuan per ton in Beijing as of Wednesday, up almost 200 yuan from two weeks earlier, Hu said.

 

Production has held steady, with total output of about 40 million tons in January, the same as a year earlier, CISA said. It said that showed a recovery of confidence in the sector.