China's August steel output recovers before expected stricter curbs

BEIJING (Reuters) - China’s monthly crude steel output picked up in August, after falling for two straight months, official data showed on Monday, as mills boosted output ahead of production cuts expected to kick in by October as part of Beijing’s anti-pollution drive.

FILE PHOTO: A worker works at a furnace at a steel plant of Dalian Special Steel Co Ltd in Dalian, Liaoning province, China April 8, 2018. REUTERS/Stringer

Total crude steel production was 87.25 million tonnes last month, data from the National Bureau of Statistics (NBS) showed, up 2.4% from 85.22 million tonnes in July and up 9.3% from a year earlier.

Average daily output in August rose 2.2% from the previous month to 2.81 million tonnes, according to Reuters calculations based on NBS data.

Output in the world’s biggest steelmaker in recent months has been pressured by shrinking profits, while escalating trade tensions with the United States has dampened overall sentiment.

“The whole manufacturing sector is affected by the trade war. Production and sales of vehicles and home appliances have been plunging,” said Richard Lu, an analyst with CRU in Beijing, speaking before the data was released. He said steel firms had also underperformed due to rising raw material costs.

Most listed steel firms in China reported profit declines or reversals into loss in the first half compared with a year earlier. The most-active steel rebar futures SRBcv1 tumbled in July and dropped 8.5% in August, although it has begun to recover ground this month.

Production has also been hit by the implementation of anti-pollution curbs beginning this month, helping to support prices.

Top steelmaking city Tangshan last week ordered industrial firms to curb production or emissions for a four-day period, in addition to its month-long anti-pollution measures, after its air quality dropped in early September.

The curbs are expected to strengthen later this month to ensure good air quality during the 70th anniversary of the establishment of the People’s Republic of China.

“There are also uncertainties on how much the restrictions during this (winter) heating season will be,” said CRU’s Lu.

In the first eight months of the year, China churned out 664.87 million tonnes of steel, up 9.1% from the same period last year, the NBS data showed.

Reporting by Min Zhang and Shivani Singh; Editing by Tom Hogue