China's steel markets remain under pressure amid piling up inventories at a time of robust production and weak demand, a development that comes at a time of growing signals over imminent output cuts in the country, industry sources said Aug. 7.

Chinese domestic rebar prices in Beijing fell by Yuan 103/mt ($14.3) from Aug. 1 to Yuan 3,753/mt on Aug. 7, while the domestic hot rolled coil prices in Shanghai fell by Yuan 100/mt over the same period to Yuan 3,970/mt, S&P Global Commodity Insights data showed.

Rebar inventories in the eastern trading hub of Hangzhou as of Aug. 4 were about 13% higher on the month and 35% higher on the year, sources said. Meanwhile, long steel inventories in northern Beijing -- mainly rebar and wire rod -- were still about 3% lower on the year, but up by 14% from early July, they said.

The hot-rolled coil inventories as of early August in eastern China's Shanghai and southern China's Guangdong Lecong markets also showed upward trend, increasing by 17% and 3%, respectively, from early July, according to sources.

Some steel traders said market sentiment was at the low point at the moment amid rising inventories. Unfavorable weather across China in the last two weeks further dented domestic steel demand, and it remains unclear when China's steel output cuts could actually begin, the trading sources added.

Market chatter indicated that China's largest steelmaking province, Hebei, may soon announce steel output cut details around mid-August.

"Even if Hebei and other provinces announce to keep their 2023 crude steel output below 2022 levels, the question remains that when and how strictly the output cuts can be carried out," a trader said.

"Chinese steel mills are currently almost running at full operation, which is likely to cause inventories to continue rising at least through August...I'm just a bit cautious whether Chinese mills could achieve output cut goals all in the fourth quarter," another market participant said.

However, some other market sources still expected China would keep its overall crude steel production in 2023 within 2022 levels, and Q4 could create a good opportunity to time steel output cuts due to low seasonal demand.

According to data from the China Iron & Steel Association, the country's daily crude steel output in July may average 2.999 million mt.

If the output in August remains the same as in July, the daily crude steel output over September-December will have to fall by 19% from July-August level to around 2.43 million mt, in order to keep China's annual crude steel output on par with 2022 levels, S&P Global calculations showed.