Steel Output Shrinks in China as Lower Demand, Prices Hurt Mills

  • Production in September contracts 3% to 66.12 million tons
  • Crude-steel output will continue to decline, analyst says

Crude steel output in China contracted in September as mills in the world’s biggest producer cut supply amid lower prices and weak demand from the property sector.

Production was 66.12 million metric tons, down 3 percent from a year earlier, the National Bureau of Statistics said on Monday. Output in the first nine months was 608.9 million tons, down 2.1 percent, according to the statistics bureau.

China’s steel industry has gone into reverse as local demand shrinks for the first time in a generation. The World Steel Association last week cut its outlook for global demand in 2015 as China’s slowdown curbs consumption. Separate figures from China on Monday showed that quarterly gross domestic product expanded at the slowest pace since 2009.

“Prices weakened amid the property-led slowdown which squeezed steel mills’ margins,” said Wu Zhili, Shenzhen-based analyst at Shenhua Futures Co.

China’s new property construction fell 12.6 percent in the first nine months to 1.15 billion square meters, the statistics bureau said. The nation’s gross domestic product rose 6.9 percent in the three months through September from a year earlier.

“We expect crude-steel output to continue to contract at this pace but it won’t fall off a cliff as mills still need to keep normal production to secure market share and bank loans,” Wu said.

Authorities ordered mills around the capital to halt or curb supply early in September to clean up the capital’s air for a parade. Analysts had forecast the restrictions may hurt production including in Hebei, the biggest producer.

— With assistance by Feiwen Rong

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