China steel prices fell for a third session on Wednesday as the country’s manufacturing sector posted its weakest growth in more than two years, even as a key steelmaking hub was reported to have issued a pollution alert requiring mills to halve output.
The most active construction steel rebar contract on the Shanghai Futures Exchange for January delivery, closed down 1.2 percent at 4,127 yuan ($592.19) a tonne, after hitting a one-week low of 4,113 yuan earlier in the session.
Hot-rolled steel coil also declined, shedding as much as 2.9 percent to 3,751 yuan a tonne, the weakest since July 9, before closing down 1.6 percent at 3,802 yuan for a 1.4 percent monthly drop.
Steel prices are diverging, with those for long products used in construction, such as rebar, remaining very high, whereas prices of flat steel products such as hot-rolled coil are “kind of weak because of the slowdown in manufacturing activity,” said Richard Lu, an analyst at CRU in Beijing.
China’s official Purchasing Managers’ Index (PMI) fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September, on a sign of deepening cracks in the economy from an intensifying trade war with the United States.
Meanwhile, the steelmaking hub of Handan is one of three cities in China’s northern province of Hebei to have issued ‘orange’ pollution alerts, the state-backed Hebei Daily reported.
Handan, Xingtai and provincial capital Shijiazhuang are set to enforce emergency smog reduction measures from 6 p.m. local time (1000 GMT) on Wednesday until further notice, the newspaper reported.
Ferrous prices also cut losses on concerns there could be similar action in top steel city Tangshan
Under an orange alert, the second-highest warning behind red in China’s four-tier system, steel mills must halve their output, while coal-fired power utilities must operate at “minimum” levels.
Among steelmaking raw materials, iron ore futures on the Dalian Commodity Exchange closed down 0.8 percent at 533.5 yuan a tonne, notching a second day of falls after hitting a seven-month high on Monday.
Iron ore gained 8.1 percent over October, its best month since November 2017, on lower shipments from miner Rio Tinto ,.
Dalian coke futures closed down 0.4 percent on Wednesday, while coking coal lost 0.3 percent.
Source: Reuters (Reporting by Tom Daly; Editing by Subhranshu Sahu and Sunil Nair)