China August commodities output weak as economic slowdown bites

China's output of key industrial commodities including coal and steel weakened in August, as government measures to cut smog ahead of World War Two commemorations further cut production already lowered by a slowing economy.

Growth in China's investment and factory output missed forecasts in the month, pointing to a further cooling in the world's second-largest economy that will likely prompt the government to roll out more support measures.

Production of coal and steel, which has steadily fallen amid weak demand and chronic oversupply, fell further in August after the government mandated the closure of scores of factories to reduce pollution in Beijing ahead of events to mark the end of World War Two that included a massive military parade.

Qiu Yuecheng, analyst with the steel trading platform Xiben New Line E-Commerce, said demand for some commodities, such as steel, may pick up in the second half of the year after the summer lull, "but with the overall economy facing pretty big downward pressures and funds still tightening, the scale of the recovery will be limited."

Crude steel output fell 3.5 per cent year-on-year to 66.94 million tonnes in August, the second consecutive monthly decline, which also triggered a 6.6 per cent drop during the month in the output of coking coal, a key steel-making material.

Raw coal output, which has been falling as a result of government measures to promote cleaner burning fuels, also dropped 2.6 per cent from the same month a year-ago, according to data published by the National Bureau of Statistics on Sunday.

Coal production is down 4.8 per cent for the first eight months, hit by a 2.2 per cent decline in thermal power production over the period as grids took on more hydropower.

Still, the anti-pollution measures failed to boost demand for natural gas, with data from the statistics bureau showing output grew 3 per cent over the first eight months of the year, down from 6.9 per cent in 2014 and 11.5 per cent in 2013.

Crude oil throughput remained resilient as refiners continued to take advantage of weak global prices. Runs rose 6.5 per cent on the year to 10.44 million barrels per day (bpd). Domestic crude oil output stood at 18.17 million tonnes, up 3.6 per cent on the year.

Oil demand rose 5.1 per cent from a year earlier to 10.26 million bpd, rising 1.4 per cent from July, according to Reuters calculations using preliminary government data.

In its latest forecast released on Friday, the International Energy Agency said it expected Chinese oil demand to grow 4.1 per cent this year, noting that demand has remained "remarkably resilient" amid the economic slowdown.

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