Richard Herselman, consultant at Steel Business Briefing expects steel capacity to increase in the next two years.
Herselman believes that steel prices will decline on account of capacity addition.

Excerpts of CNBC-TV18's exclusive interview with Richard W Herselman:

What is happening in China? Are prices really that soft?

We are seeing prices coming down in the local market. Prices are expected to soften towards the end of the year. However, at the moment, we feel that this is more of a situation of sentiment in the markets rather than a drastic slow demand. We are seeing most traders holding back purchases to see if steel prices are slowing in the coming months.

Could you give us a sense of the quantum of decrease in prices and what exactly is hurting sentiment at this point? Why are they holding purchases back?

They are primarily holding purchases back because they expect prices to soften. There is a lot of capacity coming on this year and in the coming years for hot-rolled coils and cold-rolled coils. Most of them expect this increased capacity to be more than what can be consumed, therefore they expect prices to fall. Their holding back will cause prices to come down slightly faster than it would normally happen in the markets.