Steel prices plunged from this year's record high early this month, a culmination of price rises since late July when big steel plants took to raise prices.

Prices of deformed steel bars dropped from the highest 5,000 yuan (735 U.S. dollars) per tonne to 4,200 yuan, a decrease of 16 percent, and steel wires saw the highest decrease of 20 percent, from 4,850 yuan per tonne to 3,900 yuan as of Wednesday, according to the industry information provider MySteel.com.

Xu Xiangchun, analyst of Mysteel, said price hike led by major steel plants was the last straw to weigh down on the steel market and triggered the price slump.

Traders who sold stockpiles to cash in on earlier price rises also helped drive the prices lower, Yao Hongchao, president of a Henan steel trader told the China Securities Journal.

Other traders suffered huge losses as prices slumped, while steel producers had significantly reduced stockpiles when prices were high, said Zhang Ping, an analyst with Umetal, another industry information provider.

Steel price adjustment might continue for some time, said Zhang, as stockpiles continued to rise on lower trade and maintained supply.

He said price change was a technical adjustment at first, but it could be compounded by a change in macro policies, such as a slight adjustment in bank credit, and a bearish run of the stock market that may impact investor confidence.

Xu said signs showed steel prices had plunged too much and might overdive.

Zhang expected prices of deformed steel bars could stabilize at 3,700 yuan per tonne before overdiving.