China's steel and iron ore market is positive

China's steel and iron ore futures have stabilized after a three-day decline, supported by expectations that steel prices will remain strong amid the country's planned production cuts during the winter to combat smog.

Large industrial zones in China, including the leading industry in Hebei, were ordered to cut production to half from November to March.

Argonaut Securities analyst Helen Lau said the strong outlook for the real estate sector in China is also fueling demand for steel. The increase in property prices has occurred even in small cities in China. “Along with the production cuts in the winter season, we expect steel prices to rise further in the fourth quarter,” Lau said in a note.

But a potential risk to Chinese steel demand in the winter is linked to an announcement in Beijing that it will suspend construction of major public projects during the winter to improve air quality in the capital. The construction of roads and water bodies, as well as the demolition of housing, will be banned from November 15 to March 15 in six main areas of the city and its suburbs, according to the official Xinhua news agency.