November 12, 2018 / 7:13 AM / 6 months ago

UPDATE 1-Shanghai rebar sinks to 3-1/2-month low as demand worries emerge

* Baosteel cuts prices of key product for December

* Top steel producer Hebei province issues smog alert

* Coke hits five-week low (Updates prices)

By Manolo Serapio Jr

MANILA, Nov 12 (Reuters) - Shanghai rebar steel prices tumbled nearly 4 percent to the lowest since late July on Monday, pressured by worries over slowing demand in top consumer China over the seasonally weak winter period.

Prices of steelmaking raw materials also sagged alongside steel, with coke also sliding almost 4 percent to a five-week trough.

The most actively traded January rebar on the Shanghai Futures Exchange dropped as much as 3.8 percent to 3,818 yuan ($549) a tonne, its weakest since July 25. The construction steel product closed down 3 percent at 3,848 yuan.

In a sign of weakening demand, major Chinese steelmaker Baoshan Iron and Steel said on Sunday it would cut domestic prices for key steel products by as much as 200 yuan per tonne for December.

“This shows that as the winter season has kickstarted, steel demand is slowing due to weak seasonality,” Argonaut Securities analyst Helen Lau said in a note.

With China’s steel production not showing any signs of slowing down, Lau said profitability growth at Chinese steel producers may have “peaked and (we) expect margin erosion going forward.”

Ahead of China’s winter curbs where cities are ordered to reduce steel output to limit smog, the country’s crude steel output averaged 2.7 million tonnes in September, a record high. The government will release October data later this month.

The decline in steel prices came even as China’s top steel-producing Hebei province asked 10 major cities to issue an orange smog alert, requiring steel mills to halve their output. The cities were set to enforce emergency smog reduction measures from Sunday until Nov. 16.

Coke - the processed form of steelmaking ingredient coking coal - settled 2.7 percent lower at 2,303 yuan a tonne. It fell as far as 2,277.50 yuan earlier in the session, the lowest since Oct. 8.

Coking coal gained 0.7 percent to 1,360.50 yuan per tonne, after initially hitting a 4-1/2-week low. Iron ore slipped 0.8 percent to 520 yuan.

An empty iron ore train has derailed in Western Australia after poor weather eroded part of the track, operator Mineral Resources Ltd said, a week after the derailing of a runaway ore train owned by global miner BHP Billiton in the state’s north.

$1 = 6.9520 Chinese yuan Reporting by Manolo Serapio Jr.; editing by Richard Pullin

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