China's steel industry is keeping a wary eye on the Washington's Buy American plan, as it could see sales hurt if imported steel is excluded from infrastructure projects funded by a $900 billion stimulus package.

The US Senate this week voted to soften language in the original stimulus bill, which had required that all public works projects funded by the stimulus package use only US-made iron, steel and manufactured goods.

"If Americans only buy American and Chinese only buy Chinese, what will be traded around the world?" said Shan Shanghua, secretary-general of the China Iron and Steel Association, which represents the country's largest steel mills.

China's biggest steel product export to the US is steel pipe, Mr Shan said, but its mills also supply lower-value construction steel to North America.

Last month, the US set anti-dumping duties on stainless pressure pipe from China, in a sign of how China's growth into higher-value steel production can trigger trade frictions. It's too early to tell how the US plan could benefit steel mills searching for customers, even if the "Buy American" clause is removed.

"We have to see how much infrastructure investment is included in the stimulus plan," said Qi Xiangdong, vice secretary-general of the association.

"If there's a lot, US steel demand will rise, and that will affect the pattern of import demand, not just from China, but from the rest of the world."

China's steel market found its footing in December, after prices went into freefall in October and November as a collapse in international steel demand amplified a sharp domestic slowdown that began during the summer.

Its net steel exports fell to 44.84 million tonnes last year, from 51.97 million tonnes in 2007, as the world market dried up.

Thanks to a domestic stimulus package, Chinese prices are now above those of international markets, attracting imports and keeping exports firmly in check.

But in the long run, China's immense steelmaking overcapacity means that its industry will have to rely on exports to stay profitable.

That could be good news for some US steel customers, including school boards, whose construction budgets soared along with the price of steel in recent years.