The bellwether industrial-production indicator fell 1% on an average daily basis to 61.69 million metric tons, although the volume rose on a monthly basis by 2.5%, the National Bureau of Statistics said Monday. A ladle pours molten iron into a container at a steel plant in Hangzhou, Zhejiang province, China, in May. July crude steel output slipped 1% from June.
China makes half of the world's steel and variations in output affect global prices and can potentially aggravate trade tensions. "It's fairly clear that the weight of the combination of near-record production through mid-July in the face of waning domestic steel demand has put China in a 'perfect storm' of near three-year low pricing," U.S.-based Steel Market Intelligence said in a report.
Daily average production-a more accurate reading of the pace of output-reached 1.99 million tons in July, down from 2.01 million tons in June. Domestic demand has been waning largely due to the government's efforts to cool an overheated property market.
Baoshan Iron & Steel Co., 600019.SH 0.00% China's largest listed mill and bellwether steelmaker, said Friday that it will cut product prices for September, for the third month in a row. Steel prices on the Shanghai Futures Exchange have fallen some 13% from the start of 2012. Mills have kept export levels relatively high in recent months to compensate for flagging domestic demand, despite a U.S. decision in May to levy anti-dumping duties on some steel products from China. Still, even external demand has weakened, causing net July Chinese steel exports to plummet 23% from June.
Copper output also eased due to high stockpiles, falling 6.8% from a record 518,000 tons in June. "The utilization rate of copper smelters was not very high last month," said Shanghai Cifco Futures analyst Jiang Haihui. Still, producers may be keeping smelters in operation, despite flagging downstream demand, in anticipation of supportive macroeconomic and monetary policies, Mr. Jiang said.
July copper output rose 0.8% from a year earlier to 483,000 tons. Production of all other major base metals, except tin, also fell from a month earlier. Nickel fell by 14.1%, zinc by 12.9% and lead by 8.5%.