BEIJING (Commodity Online): Steel prices are set to suffer a setback in the coming days as China is bracing fro a slowdown in realty sector and the American Iron & Steel Industries reported a rise of US domestic raw steel production, which was 1.754 million tonnes while the capability utilization rate was 72.5% in the week ended on May 1.

In a recent order, China had cracked down on realty sector and barred people from buying a third house in Beijing. This move was to rein in the realty price rise. However, this will impact the construction boom in the country and that will have a bearing on steel prices across the globe as China is the biggest buyer of the commodity.

In the US, steel production for the week ending May 1, 2010 is down by 0.6% WoW from the previous week ending April 24, 2010 when production was 1.764 million tons and the rate of capability utilization was 72.9%.

However, steel production was 984,000 tonnes in the week ending May 1, 2009, while the capability utilization then was 41.1%. The current week production represents a 78.3% YoY increase from the same period in the previous year.

Steel is the backbone of China's economic rise. Last quarter, China's economy grew by 11.9% from a year earlier. More than 43% of this growth was from investment in fixed assets, such as roads, factories, houses, and machinery. These fixed assets rely heavily on steel, whether as a building material or construction machinery.

Iron ore is a raw material critical to steel production. As such, maintaining stable iron-ore prices is vital to economic growth, essentially giving stability to the cost of building a modern economy. However, in recent years, China has struggled to maintain stable iron-ore prices, as increasing demand for ore from abroad has made China vulnerable to shifts in the global marketplace.