Some Chinese steel mills ordered to cap output this year - sources

BEIJING (Reuters) - Several Chinese steel mills have received instructions to cap this year's output at the same level as 2022, five people familiar with the matter and analyst reports said on Tuesday, potentially curbing iron ore demand in the world's top steel market.

Three mills owned by the world's biggest steelmaker, state-owned China Baowu Steel Group, were given verbal instructions that output should not exceed that of 2022, said four of the sources, with two adding the orders were delivered yesterday.

None of the people specified which authority issued the orders and all declined to be identified because of the sensitivity of the matter.

A Baowu public relations official said he had no information to share on the matter.

China has mandated zero output growth in its steel sector for the last two years as it seeks to limit carbon emissions by one of its most polluting industries.

In both 2021 and 2022, the state planner announced the zero growth target in the second quarter, but no public announcement has been made this year, leaving the market guessing on Beijing's plans.

China's state planner did not respond to a fax seeking comment on the caps issued at some steel mills.

Some mills in the northern Chinese city of Tianjin were notified to keep steel output below the 2022 level, according to reports by local consultancies Mysteel and Fubao on Tuesday, which did not specify the number of mills.

Some mills in eastern China also received similar instructions, consultancy Shanghai Metals Market said.

However, a dozen mills in northern Chinese cities including Tianjin and Handan contacted by Reuters said they had not yet received any instructions to cap their output.

The most-traded steel rebar contract on the Shanghai Futures Exchange closed daytime trading 1.21% higher at 3,857 yuan ($539.93) per metric ton on Tuesday, the highest since April 20.

China produced 535.64 million metric tons of crude steel in the first half of the year, up 1.3% from the same period last year, data from the National Bureau of Statistics showed.

Output in 2022 fell 1.7% on the prior year to 1.018 billion metric tons.

($1 = 7.1435 Chinese yuan)

(Reporting by Dominique Patton and Beijing newsroom; Editing by Chizu Nomiyama)