November 20, 2018 / 8:59 AM / a year ago

UPDATE 1-Shanghai rebar posts worst plunge in 8 mths on weak demand outlook

* Steel prices under pressure amid high production

* Steel mills slow down restocking; coking coal, coke down

* Global iron ore output to grow modestly in coming years-Fitch Solutions (Updates closing prices)

BEIJING, Nov 20 (Reuters) - China’s construction steel rebar plunged nearly 3 percent on Tuesday, its worst daily percentage drop in eight months, as concerns about slowing demand continued to dampen sentiment.

High production at Chinese steel mills also pressured steel prices, although cities in the northern part of the country have started to enforce restrictions for the winters. Construction work is typically halted in northern China in winter due to the frigid weather conditions.

Last week, weekly utilisation rate at steel mills across the country rose for a third straight week, up 0.14 percentage points to 67.82 percent, according to Mysteel data.

“The controversy of high output has not been solved, while demand is expected to weaken in the future. That makes physical prices face increasing pressure to plunge further, dragging down near-month future contracts,” said analysts from CITIC Futures in a note in Mandarin.

Benchmark steel rebar prices on the Shanghai Futures Exchange settled down 2.9 percent, the biggest percentage drop since March 23, at 3,742 yuan ($539.37) a tonne.

Spot steel prices fell 1.3 percent to 4,300.42 yuan a tonne on Monday, their lowest level in four months, according to data tracked by Mysteel consultancy.

Meanwhile, deep divisions between the United States and China at the Asia Pacific Economic Cooperation (APEC) summit over the weekend added to uncertainties over the trade dispute between the two countries. The meeting failed for the first time to agree on a joint communique.

The decline in steel prices weighed on steel-making raw materials.

The most-traded coke contract for January delivery on the Dalian Commodity Exchange slumped 3.6 percent to 2,303.5 yuan a tonne, while coking coal futures fell 0.9 percent to 1,371.5 yuan.

“With falling steel prices and high level of coke prices, steel mills are slowing down their restocking process,” said CITIC analysts.

Dalian iron ore prices closed 1.2 percent lower at 516.5 yuan.

Fitch Solutions Macro Research said it expects global iron ore production to grow modestly from 3.355 billion tonnes in 2018 to 3.409 billion tonnes by 2027, driven by mine expansion in Brazil and increasing output from India.

$1 = 6.9377 Chinese yuan renminbi Reporting by Muyu Xu and Dominique Patton, Editing by Sherry Jacob-Phillips, Amrutha Gayathri

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