October 30, 2017 / 8:20 AM / 5 months ago

UPDATE 1-China iron ore hits 4-mth low ahead of winter steel cuts

* Iron ore fell to the lowest level since June 27

* Mill utilisation rate dropped to 71.13 pct last week

* Production cuts at mills may step up -analysts (Updates prices)

BEIJING, Oct 30 (Reuters) - China’s iron ore futures dropped more than 3 percent to a four-month low on Monday and were on track for a second straight monthly drop as concerns grow about waning demand due to Beijing’s winter smog crackdown on steel mills.

The most-active iron ore contract for January delivery on the Dalian Commodity Exchange closed 3.3 percent lower at 425 yuan ($63.92) a tonne on Monday, after earlier touching 421 yuan a tonne, the lowest since June 27. Prices are on track for a 5 percent drop in October.

“Iron ore demand has come under pressure as steel mills stepped up production cuts,” said analysts from Hongyuan Futures in a note.

Last week, the utilisation rate at steel mill blast furnaces across China fell to the lowest level since 2012 at 71.13 percent, and as low as 66.03 percent in the top steelmaking province of Hebei, data from Mysteel consultancy showed.

Tangshan, the country’s top steel-making city, was ordered to make deeper cuts over Oct. 24-27 as adverse weather may worsen the smog.

More rigorous pollution curbs are expected in November as manufacturers in 28 cities in northern China will be asked to stagger production to reduce pollutant emissions.

Air quality in the Beijing-Tianjin-Hebei region showed no improvement in September compared with last year, according to data from the Ministry of Environmental Protection (MEP), putting more pressure on authorities to meet politically crucial pollution reduction targets.

The most-traded steel rebar futures on the Shanghai Futures Exchange fell 1.3 percent to 3,571 yuan a tonne.

Spot steel rebar prices fell 0.6 percent to 4,265 yuan a tonne on Friday, according to data from Mysteel website.

“Steel output has been declining due to production cuts amid environmental orders, while demand is unstable as the peak season for construction is over,” said the Hongyuan analysts’ note.

The coking coal contract for January delivery fell 0.8 percent to 1,094 yuan a tonne. Coke futures dropped 2.9 percent to 1,683 yuan a tonne on Monday.

“Demand for raw materials may further decrease ahead of winter as mills might cut stockpiles if production curbs continue stepping up,” said Hongyuan Futures.

$1 = 6.6485 Chinese yuan Reporting by Muyu Xu and Josephine Mason; Editing by Tom Hogue and Biju Dwarakanath

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