China steel mills shrug off anti-smog measures

China's steel output rose in July to a fourth straight monthly record as mills ran full tilt to cash in on strong profit margins, despite anti-smog measures imposed by local governments, reports Reuters.

Mills in China, the world's top steel producer, churned out 81.24 million tonnes of crude steel last month, up 1.3 per cent from June and 7.2 per cent from the same month last year, data from the National Bureau of Statistics showed on Tuesday.

"The reason we didn't see declines in steel output amid the environmental crackdown is that steel mills have improved their production efficiency by using higher grades of iron ore and adding more scrap steel to churn out more products," said Wang Yilin, an analyst at Sinosteel Futures.

Daily average output fell 2.0 per cent from June to 2.62 million tonnes in July, according to Reuters calculations based on the official data. July has one more day than June.

Year-to-date output to end-July grew 6.3 per cent compared with the previous year to 532.85 million tonnes.

Profit margins at Chinese steel mills touched around 1,100 yuan ($159.59) a tonne, near the record levels of last December, according to analysts from Huatai Futures.

The margins are supported by strong demand from downstream users and ongoing supply-side reform, as well as environmental measures that have helped to eliminate low-cost producers from the market, the Huatai analysts said.