October 11, 2017 / 2:36 AM / 9 months ago

China steel bounces off 2-month low on winter production cuts

* Rebar inventory rises during Golden Week ahead of winter cuts

* Spot iron ore falls to lowest since June

By Manolo Serapio Jr

MANILA, Oct 11 (Reuters) - Chinese steel futures recovered from two-month lows on Wednesday as market participants sought to secure supply ahead of looming steel production cuts in China this winter as part of Beijing’s fight against smog.

Iron ore also regained some lost ground after steep losses earlier in the week that pulled prices of the steelmaking raw material to their weakest in three months.

The most-active rebar contract for January delivery on the Shanghai Futures Exchange was up 0.1 percent at 3,605 yuan ($548) a tonne by 0217 GMT, after earlier touching 3,512 yuan, its weakest since July 31.

“Concerns in Chinese steel product markets are growing over substantial inventory level increases during the Golden Week holiday,” SP Angel analysts said in a note.

While downstream demand has yet to match the increase in rebar stocks, analysts say the increased inventory levels are likely a consequence of mills boosting production ahead of looming restrictions during winter.

Chinese markets were for a national holiday from Oct. 2-6.

Rebar inventory among Chinese traders rose by more than 250,000 tonnes from Sept. 29 to 4.36 million tonnes on Oct. 10, according to data compiled by industry consultancy SteelHome. SH-TOT-RBARINV

China has ordered industrial companies, including steel mills, to curb output for four months from mid-November. But other cities have implemented the production cuts well ahead of that deadline.

Some 14 steel mills in Wu’an city in China’s top steelmaking province of Hebei have been ordered to cut production to 50 percent of their blast furnace capacity from Oct. 7 to tackle air pollution in the area, Macquarie said in a note, citing Mysteel consultancy.

Iron ore on the Dalian Commodity Exchange rose 0.5 percent to 442 yuan a tonne, after hitting a three-month low of 434.50 yuan on Tuesday on worries over slower winter demand when the steel production cuts are broadly in place.

As of Oct. 10, inventory of imported iron ore at China’s ports reached 133.85 million tonnes, the most since late August, SteelHome data showed. SH-TOT-IRONINV

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slid 2.6 percent to $61.01 a tonne on Tuesday, the lowest since June 27, according to Metal Bulletin.

The spot benchmark has fallen 24 percent from a 4-1/2-month high of $79.93 reached in August.

$1 = 6.5788 Chinese yuan Reporting by Manolo Serapio Jr.; Editin by Kenneth Maxwell

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