China's steel mills continued production cuts in late October and early November as declining construction demand and weakening profit margins forced deeper reductions despite the traditionally low season, according to market sources.

Even as steel production falls, Chinese steel prices are expected to face resistance from weak domestic demand in November and December, with inventories remaining high despite output cuts, China-based market participants said Nov. 11.

The daily pig iron and crude steel output at China Iron and Steel Association member steel mills averaged 1.744 million metric tons and 1.817 million mt, respectively, over Oct. 21-31, down 5.8% and 9.8% from mid-October, and 7.5% and 13.2% lower than in the same period last year, CISA data released Nov. 11 showed.

For the full month of October, daily pig iron and crude steel output averaged 1.821 million mt and 1.95 million mt, respectively, down 2.9% and 3.3% month over month and 2.5% and 5.9% year over year, the data showed.

The downtrend in production has continued into November, with the average utilization rate at China's blast furnaces currently about 88%, down roughly one percentage point from end-October and three percentage points from end-September, according to China-based trade sources.

The production cuts reflect deteriorating profit margins at steel mills, with hot-rolled coil sales margins falling to breakeven levels from Yuan 50-100/mt ($7-$14/mt) in mid-September and over Yuan 300/mt in early August, trade and mill sources said. Rebar sales are currently running losses of around Yuan 50-100/mt, they added.