Rebounding steel prices in China have even prompted some idle mills back into production. That doesn't mean, though, that the steel traders are happy campers.

Li Huasheng has been a steel trader for over 13 years, dealing between steel manufacturers and car producers. Based in Shanghai, his company makes over 30 million RMB in revenue a month from both imports and exports. He says the jump in prices since the beginning of the year has been anything but good news for his business.

"We gave our prices to our clients, they agreed, and we signed the contracts. But then after the contracts were signed, we would find the prices from the mills suddenly rose, and that's where the losses came from," said Li Huasheng.

"For example, I would agree on a price in the morning, only to find the price had jumped in the afternoon. We had already made commitments to our clients, but the steel manufacturers have a lot of market power, so if they want to raise the prices, there's nothing we can do."

Li said that the price increases were originally fueled by a seasonal recovery in demand and that a number of steel mills stopped production before the Spring Festival. He says the rise also has been troubled by increased speculation in the futures market.

Li says that is unlikely to last, though. His clients simply would not accept the price increses demanded by steel producers.

Last week, steel prices were rising 200 RMB a ton per day. Li estimates steel mills are now making an additional 500 to 800 RMB more per ton than they were at the end of last year.

According to figures from the National Bureau of Statistics, the increased prices actually led to increased steel production in March of 2.9 percent to a record 70.65 million tons over March last year.

But none of that did Mr Li any good. He saw his profits cut by more than 50%, and in some cases was forced to lose money on contracts. His clients simply would not accept the price increases demanded by steel producers.

"The demand is not as robust as the price increases from the manufacturers are. For example, the production and sales volume of automobiles is down compared with the Spring Festival," Li also said.

"So our clients are refusing to accept the new higher prices, at least for now. Our clients tend to have a longer time frame for purchasing and ordering. Their current budget may be based on figures from the previous year, so if they accept higher prices for raw materials, their profit margin will be squeezed."

China's steel sector is still struggling with significant overcapacity. China last year produced around 800 million tons of steel while demand was around 700 million tons.