Steel exports are likely to be hit with demand from the Severe Acute Respiratory Syndrome-hit China slackening due to a three-week inventory pile-up.

There could be huge cancellations of export orders from India as a result of this, an industry analyst said.

The analyst said most industrial units in China consuming steel had shut down in the past few days and inventories had started piling up.

"Though there have been no cancellations till now, there may be some in the coming weeks. The next few weeks will be critical for the domestic steel industry," he said, adding that this inventory pile-up might cause fluctuations in global steel prices with demand likely to drop over the next month or so.

"It is too early to say anything. There have been no cancellations as yet, but there could be some cancellations in the next few weeks in case the epidemic is not controlled," an official at the Steel Authority of India Ltd said.

Most steel producers in India are deciding to wait and watch. "We are studying the situation in China carefully and there has been no cause of immediate worry. However, things may take a turn for the worse in case the epidemic continues to spread," said Arvind Parakh, finance director, Jindal Strips Ltd. There had been no cancellations yet, he added.

The analyst, however, said demand was likely to pick up later with the country preparing for the Olympics in 2008.