Steel output in China sank from a record, sliding to the lowest level in at least six months, as the anti-pollution drive touted in President Xi Jinping’s landmark policy address this week began to make its mark.
Output fell to 71.83 million metric tons in September from 74.59 million tons the month before, according to the statistics bureau on Thursday, a day after Xi’s speech to the Communist Party congress reaffirmed his commitment to rolling back environmental abuse. Over nine months, production was still higher than in 2016, rising 6.3 percent to 639 million tons, the figures showed.
China’s concerted drive to cut pollution from its old-industry factories, especially over winter, is roiling metals markets, and Xi referenced the policy in his address to the twice-a-decade Communist Party congress. In steel, China’s output has proved resilient in the past year as although officials have shuttered some mills that fell short of standards, remaining producers boosted supplies in the run-up to wintertime curbs that have yet to fully kick in.
“We expect strict enforcement of the winter supply-cut policies in order to guarantee planned reductions in pollution,” Citigroup Inc. analysts including Tracy Liao said in a report received on Thursday. The bank estimates total production losses of as much as 37 million tons from the winter shutdowns.
The bureau’s figures also showed a drop in production from China’s vast aluminum industry, which is facing winter cuts too. Output was 2.61 million tons last month, 5.6 percent less than a year ago, the bureau said. Citigroup has forecast supply cuts of 1 million to 1.5 million tons. China is the top producer of steel and aluminum.
The production data came with figures that showed gross domestic product was 6.8 percent in the third quarter, matching the estimate in Bloomberg survey. In his marathon speech, Xi mapped out a strategy for development to 2050 that emphasized the quality of growth over quantity or pace of expansion.
Steel dropped with iron ore on Thursday. Futures for reinforcing bar, a product used in construction, lost 2.2 percent on the Shanghai Futures Exchange as hot-rolled coil also fell. In Singapore, SGX AsiaClear iron futures were 2.5 percent lower at $60.15 a ton. Spot iron ore in Qingdao was at $60.88 a dry ton, down from almost $80 in August, according to Metal Bulletin Ltd.
Further declines in steel output may come in October, according to a survey from S&P Global Platts. “Market participants expected crude steel production to slow in the month ahead,” Platts said as the overall reading sank to 33.6 from 61. A figure below 50 indicates expectations for a decrease or contraction.