Weakening demand from China's residential property sector has led steel producers to push supplies overseas in an attempt to sell record inventories. US steel producers are beginning to feel the heat following an influx of cheaper steel imports from China. With the price of iron ore slumping sharply this year, down 23.4 per cent, and record volumes of the raw metal flooding the market, steel prices are expected to follow. Shanghai steel rebar futures have slumped 14.9 per cent in 2014 and are trading around CNY3104 ($US498.16) per tonne, having lost a further 1.5 per cent on Friday, the lowest price since the contract began in 2009, following a 25.2 per cent fall in new property construction in China during the first quarter. ''US steel demand has been growing strongly owing to the recovery in construction and the auto sector. But US steel producers are complaining that they cannot compete with cheap Asian imports, despite the boost to their competitiveness from cheap domestic gas,'' Capital Economics senior commodities economist Caroline Bain said. The US midwest domestic hot-roiled coil steel price sits around $US685 per tonne. While there are costs associated with transportation, the discrepancy between the two prices is hard to ignore. ''Capacity utilisation in China's steel sector was already at a low 70-75 per cent in 2013 despite steel production in that year growing by around 8 per cent. Our calculations suggest that production exceeded consumption by about 10 per cent last year,'' Ms Bain said. China Iron and Steel Association vice president Wang Xiaoqi said there was overcapacity running in China's steel industry. ''That's why we have to have a price war and we cannot sell our inventory,'' Mr Xiaoqi told the Singapore Iron Ore forum last week. ''The tendency for expansion is becoming contained. A lot of enterprises have realised that if you cannot comply, it puts something like a death road in front of you, we are really stressing environment protection.'' The Chinese government has signalled, as part of its attempts to become a more market-based economy, that it will shut down inefficient, unprofitable and polluting steel mills. This is likely to lead to consolidation with China's steel industry in the longer-term, if enacted, and would lead to a higher, more stable steel price. ''Accelerating environmental reforms is high on the agenda for Beijing, but as yet, there's not a lot of evidence of mills being closed and staying closed,'' CLSA head of resources Andrew Driscoll said. ''If Beijing were truly serious about the environment, one way they could take a giant step forward, in terms of improving the environment, would be to introduce an export tax for steel, thereby substantially reducing China's steel production,'' Mr Driscoll said. There is also the risk that the US imposes restrictions on China steel imports in order to protect its own industry. If the US were to push this point, likely under anti-dumping laws, Chinese steel prices will suffer further. ''Indeed, it may be that falling prices will be the eventual catalyst to force consolidation and rationalisation of the Chinese steel sector,'' Ms Bain said.