China's steel companies are now enveloped by a strange air. Blue chip Mocks are seen almost everywhere in the steel sector, but investors seem equally insensitive. Since 2005, steel stocks have become the most underrated ones in China's stock market, with the P/E ratio of most stocks swaying over five. Stock prices of a great many steel companies even dropped below their net assets. Due to a different judgment from domestic investors on the future development of China's steel sector, overseas steel giants make contrary estimations on the value of China's steel companies. Domestic investors believe that China's steel market is already saturate and companies are facing a limited future margin as a result of soaring iron ore costs and sagging steel prices However, in the eyes of international steel giants such as Mittal and Arcelor. China is not only the biggest steel producer hut the largest market in the world as well. They think that since China is down the road of industrialization and urbanization and the average steel consumption per person in China is still far below that in developed countries, the country will have a rising demand of steel, and thus Ihe future of the sector still remains bright. In the face of the widely underrated stocks. even without bargaining, foreign steel giants offered such high purchasing prices that hardly any domestic corporation would reject. Hadn't there been national strategic restrictions, these foreign companies would wish to put all the cheap Chinese steel companies into their pocket. However while Mittal and Arcelor are striving to enter China's steel sector, an integration move within the domestic steel industry is being carried on with a faster pace.