Capacity utilisation rates of blast furnaces at 163 steel mills across China fell to 76.81percent, as of July 16, from 77.61percent the week earlier, data from Mysteel consultancy showed. That compared with 85.6percent in the same period a year earlier.
"Currently, the biggest variate to affect steel prices is crude steel output control policy ... which is gradually being implemented and widened," analysts with Huatai Futures wrote in a note.
The limit to power consumption due to high temperature in Henan province also led to lower steel production, said Huatai.
The most-traded steel rebar on the Shanghai Futures Exchange, for October delivery, ended up 0.8percent to 5,568 yuan ($859.42) per tonne. Hot-rolled coils, used in the manufacturing sector, inched down 0.1percent to 5,926 yuan a tonne at close.
But with Beijing still keeping a close eye on commodity prices and vowed to crack down on market irregularities, analysts warned of policy risks with steel prices hovering at high levels.
The August contract for stainless steel futures on the Shanghai bourse dipped 0.1percent to 18,705 yuan a tonne. Benchmark iron ore futures on the Dalian Commodity Exchange, for September delivery, fell 1.5percent to 1,225 yuan per tonne. Dalian coking coal gained 0.6percent to 2,041 yuan a tonne while coke futures edged down 0.2percent to 2,663 yuan per tonne. Spot prices of iron ore with 62percent iron content for delivery to China increased $1.5 to $223 on Friday, according to SteelHome consultancy.
