Chinese steel futures prices have tumbled over the past week on expectations of a steel oversupply, due to a relaxation of production cuts over winter, market sources said this week. 

January 2020 rebar contracts traded on the Shanghai Futures Exchange closed at Yuan 3,324/mt ($470/mt) on Thursday, down 4.2% from the end of September. 

China's winter emissions control plan does not contain across-the-board output cut percentages, as was the case previously when capacity utilization rates were reduced by up to 50%. 

Larger, more efficient mills that have invested heavily in environmental protection facilities will be exempt from any production restrictions. More autonomy will be given to provincial governments to monitor the pollution situation and trim output accordingly. 

The finalized plan has revised down emissions targets from the draft plan released in September. The average particulate matter concentration under 2.5 micrometers from October 1-March 31 is now set to decrease by 4% on the year in the "2+26 cities" region, down from a previous indicative target of 5.5%. 

Some steel market sources said improved environmental protection facilities and downward pressure on China's economy were the main factors behind the relaxed measures. 

One Tangshan-based steel mill source said the city government will still order steel output cuts for the winter season, but to what extent remained unclear. 

Steel traders were skeptical that winter output cuts would be enforced regardless of the supposed targets. They noted that in September, when mills were supposed to reduce production ahead of the National Day celebrations in Beijing, implementation of the cuts lasted barely a week, from around September 28-October 2. 

One trader said there was no indication that steel supply was being adjusted ahead of the slower demand season that starts in late October-early November, which meant prices were likely to be pressured by high steel inventories.