October 19, 2018 / 7:35 AM / a month ago

China steel prices slide as output hits record, GDP slows

MANILA (Reuters) - Chinese steel prices fell on Friday after data showed daily output in the world’s top steel producer climbed to a record in September and China’s economy slowed to the weakest pace since 2009.

A worker sprays corrosion inhibitor on a furnace at a steel mill of Dalian Special Steel in Dalian, Liaoning province, China September 26, 2018. Picture taken September 26, 2018. REUTERS/Stringer

The increased steel production came as mills chased strong prices and ahead of China-led output curbs during winter as the country aims for clearer skies.

The most actively traded January rebar on the Shanghai Futures Exchange closed down 2.4 percent at 4,055 yuan ($585) a tonne. Hot rolled coil dropped 1.4 percent to 3,860 yuan.

China’s crude steel production reached 80.85 million tonnes last month, up from August’s 80.33 million tonnes and from 71.83 million tonnes in September last year, government data showed.

That put average daily output in September at 2.7 million tonnes, the highest on record, according to Reuters’ calculation.

“Steel profits are still very high and that’s the reason why everyone is increasing production, to maximise their profits,” said Helen Lau, analyst at Argonaut Securities in Hong Kong.

The average profit margin at steel mills is currently running above 1,000 yuan a tonne, according to Huatai Futures.

The impact of government-led production curbs over winter would be the key driver for output in the fourth quarter, although Lau said they are likely to be more relaxed compared with last year’s.

China allowed local governments to set their own winter production restrictions this year, ditching last year’s blanket limits.

In Tangshan, China’s top steelmaking city, mills continued to ramp up output this month in the absence of detailed orders from the city government.

Also weighing on prices, China’s economy grew less than expected at 6.5 percent in the third quarter from a year earlier, marking its weakest expansion since the global financial crisis amid a trade war with the United States.

Prices of steelmaking ingredients also declined. The most-traded iron ore on the Dalian Commodity Exchange fell 1.6 percent to 515 yuan a tonne.

Coking coal slid 2.6 percent to 1,356 yuan a tonne and coke slumped 3.9 percent to 2,353.50 yuan.

($1 = 6.9320 Chinese yuan)

Reporting by Manolo Serapio Jr.; editing by Richard Pullin and Sunil Nair

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