China's steel output slows ahead of winter curbs

Daily crude steel output in October was at 2.63mn t compared with 2.76mn t in September, according to calculations based on national bureau of statistics data. Monthly output in October was at 81.52mn t, down by 1.51pc from the previous month and 0.6pc a year earlier.

Crude steel output fell at a slower pace than pig iron output, indicating an increase in scrap use for steel production. Pig iron output in October fell by 2.7pc from the previous year at 65.58mn t.

Crude steel output during January-October was higher by 5.4pc at 675.18mn t.

Steel output may slow further in November and December, at least on a sequential basis, as demand typically slows in the winter months while production restrictions will be imposed across China to reduce emissions and smog in cities.

The main steel-producing cities have not yet announced the extent of steel and sintering production cuts, which will provide clarity on how much production could fall in the winter months. The 2018-19 winter season's crude steel production was around 42mn t higher than in the 2017-18 winter because of looser restrictions in the key producing cities, such as Tangshan.

Real estate growth stays brisk

Demand from the real estate sector remains robust, with property investment on track to grow by over 10pc this year and outstripping a 9.5pc growth in 2018. January-October real estate investment grew by 10.3pc from a year earlier, with the trend of slowing growth remaining intact since hitting the year's high of 11.9pc during January-April.

New project start-ups in area terms grew at a fast rate of 10pc during January-October. Property sales growth in area terms grew by 0.1pc, although it was faster at 7.3pc in yuan terms, indicating continued rise in commercial real estate values. Real estate inventories fell by 6.6pc in area terms.

Infrastructure sector growth grew by 4.2pc during January-October, down from 4.5pc for January-September. An expected rebound in this year's fourth quarter for infrastructure projects has not materialised yet, despite Beijing substantially increasing funding for such projects through the issuing of special bonds to provinces. Railway transport investment, a key source of steel demand, grew by 5.9pc, down by 3.9 percentage points from January-September.

Industrial output growth slowed sharply in October at 4.7pc from a year previously from 5.8pc in September. But the auto sector — a key consumer of flat steel products — grew by 4.9pc, while the rail, shipbuilding, aerospace and equipment sectors grew by 3pc. A deceleration in auto output has pressured prices of hot-rolled coil for most of the year, so continued output gains will support prices in the short term.