BEIJING, July 20 (Reuters) - Shanghai rebar futures retreated from a two-day winning spree on Friday as inventories of the construction steel product piled up, but were poised for their biggest weekly gain in seven on the back of lean supply concerns.
Weekly stockpiles of steel products rose 29,500 tonnes to nearly 10 million tonnes, as of Friday, compared with a week ago, Mysteel data showed, a sign of waning demand as off-peak season approaches.
Rebar inventory dropped 0.35 percent to 4.56 million tonnes, while hot-rolled coil stocks rose 2.5 percent to 2.13 million tonnes from the previous week.
“Chinese domestic demand for metals, including steel and aluminium, will slow down in the second half of 2018 and 2019 in general as construction and infrastructure projects start to thin out with the easing of government fiscal support,” according to BMI Research.
The most-active rebar futures was down 0.3 percent at 3,972 yuan ($585.29) a tonne, as of 0212 GMT.
Hot-rolled coil contracts declined 0.9 percent to 4,024 yuan a tonne.
Despite tepid demand, steel prices are still supported by intensifying environmental measures.
The top Chinese steelmaking city ordered steel mills, coke producers and utilities to further cut output from July 20 until August in addition to the 10 percent-15 percent cuts imposed from March to November.
The city of Tangshan did not instruct factories on how much output should be reduced, but the market expects sintering production, a process where iron ore is heated to make hot metal, to be curbed by 30 percent-50 percent.
The move to deepen cuts in emissions will last for six weeks from July 20 until Aug. 31, according to the document, which was reviewed by Reuters. That will be in addition to 10 percent-15 percent capacity cuts imposed from March to November.
Meanwhile, Wu’an city in Hebei province also asked steel mills to shut sintering machines from July 19-22 to lower emission levels during an expected smog period.
Spot steel prices rose 0.4 percent to 4,352.69 yuan a tonne on Thursday, according to Mysteel.
Steelmaking raw material prices showed a mix on Friday.
The most-traded iron ore contract for September delivery on the Dalian Commodity Exchange slipped 0.4 percent to 468.5 yuan a tonne as production curbs on sintering process will reduce demand for iron fines.
Dalian coking coal climbed 0.3 percent to 1,161 yuan a tonne, while coke futures remained little changed at 2,026.5 yuan a tonne.