Surplus of steel supply for shipbuilding in China may worsen due to the decline of new shipbuilding orders and growing production capacity of steelmakers, an expert said.

"The maximum steel demand is estimated to reach 20 million tons in 2010, while the supply in 2008 increased by 63 percent year-on-year to 20.14 million tons," China Securities Journal reported, citing Tan Naifen, information department vice-director of the China Association of the National Shipbuilding Industry.

"More production lines will be put into operation in 2009. The supply is sure to surpass the demand, which will cause steel prices to plunge and vicious competition among steelmakers," said Tan.

According to CBI China, a Beijing-based market research agency, demand and price decline of steel for shipbuilding began in the second half of 2008, and the trend will last throughout this year.

Exports can hardly ease the condition because shipyards in South Korea and Vietnam are also facing a decrease of new orders and financial difficulties. Besides, Chinese exported steel is now losing its price advantage as foreign steelmakers lower their product prices, according to Tan.