October 16, 2018 / 7:36 AM / a month ago

UPDATE 1-Shanghai rebar retreats after hitting nearly 4-wk high

* China 2019 steel demand seen flat, lack of stimulus -worldsteel

* Chinese mills’ profitability supported by supply-side push -CRU (Adds Vale, Rio iron ore output; updates prices)

By Manolo Serapio Jr

MANILA, Oct 16 (Reuters) - Chinese rebar steel futures pulled back after rising to their strongest in almost four weeks on Tuesday, though the marginal losses suggest the outlook for prices remains firm amid output restrictions as Beijing keeps up its anti-smog fight.

Despite forecasts for flat Chinese steel demand next year, analysts say steel prices in the world’s top producer and consumer will remain supported by the country’s resolve to reduce excess, outdated capacity.

The most-active January rebar on the Shanghai Futures Exchange rose as far as 4,167 yuan ($602) a tonne, its highest since Sept. 20, before slipping 0.3 percent to close at 4,117 yuan.

The World Steel Association estimates China’s steel demand will rise 6 percent this year to 781 million tonnes and will stay there in 2019, saying the absence of stimulus measures would cause Chinese demand growth to decelerate.

Wang Li, an analyst at CRU consultancy in Beijing, said she does not expect China’s steel consumption to show a steep decline given the country’s continuing infrastructure investment and firm manufacturing sector.

“The steel price is still high and the profitability of the Chinese steel industry is also quite good, so even though there could be some decline in steel consumption, we don’t see it hurting the profitability of the steel industry that much,” said Li.

“What we see so far is more supply-side restrictions (will happen), so the profitability of the steel industry could still be relatively healthy.”

China’s top steelmaking city of Tangshan has ordered mills to cut output by half from Oct. 11 to 18 due to forecasts of adverse weather, while the province of Hebei, where Tangshan is located, last week started its environmental inspections of industrial plants.

January iron ore on the Dalian Commodity Exchange dropped 1.1 percent to settle at 507.50 yuan a tonne. Coking coal gained 0.3 percent to 1,367.50 yuan and coke fell 2.5 percent to 2,448.50 yuan.

Spot iron ore for delivery to China from Australia SH-CCN-IRNOR62 was unchanged at $70.70 a tonne on Monday, according to data tracked by SteelHome consultancy.

Iron ore output at Brazilian miner Vale SA, the world’s largest iron ore producer, reached a record 104.95 million tonnes in the third quarter, boosted by the ramp-up of its S11D project in the Amazonian state of Pará.

Second-ranked Rio Tinto said its third-quarter iron ore shipments fell about 5 percent to 81.9 million tonnes, hurt by planned maintenance and safety pauses across all operations following a fatality.

$1 = 6.9237 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Subhranshu Sahu and Joseph Radford

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