Steel Output Falls to 5-Month Low in China as Mills Idle Plants on Demand

Crude steel production in China, the world’s biggest maker of the metal, fell to a five-month low as companies shut plants for maintenance on weaker demand.

Output was 51.7 million metric tons in July, according to data from the National Bureau of Statistics today. That’s 3.9 percent lower than June, and 2.2 percent higher compared with a year ago, according to data compiled by Bloomberg.

Hebei Iron & Steel Group and Wuhan Iron & Steel Group led about 40 percent of Chinese steelmakers in reducing production after prices fell as much as 17 percent from April as the government introduced measures to curb speculation in the property market. China also wants mills to shut old plants to reduce energy needs and pollution by the end of September.

“Steel prices had dropped for three months from mid-April to mid-July, and for some products, prices are below or near the cost of production,” Hu Yanping, an analyst at researcher UC361.com said today. “China’s policies on the property market hurt steel demand.”

The nation’s banking regulator last month asked lenders to conduct stress tests to gauge the effect of a drop of as much as 60 percent in residential property prices, a person with knowledge of the matter said. Construction accounts for 70 percent of China’s steel consumption.

Steel product output jumped 9.7 percent to 67.7 million tons in July, from a year ago, the government data showed.

Benchmark Chinese steel prices have risen for three straight weeks as manufacturers restock after depleting inventories. Prices gained 0.5 percent to 4,259 yuan ($629) a ton yesterday.

--Helen Yuan and Xiao Yu. With assistance from Baizhen Chua in Beijing. Editors: Tan Hwee Ann, Keith Gosman.

To contact the Bloomberg News staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net; Xiao Yu in Beijing at yxiao@bloomberg.net

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