China iron ore, steel prices rise ahead of output curbs

14 November 2017

China’s iron ore futures edged up on Tuesday along with prices for steel rebar, buoyed as some steel mills ramped up production a day before winter output cuts take full effect.

Industrial plants in northern China have been ordered to curb output by up to 50 percent during the heating season that kicks off on Wednesday, as the government wages its war on pollution.

But analysts expect demand to fade again as the production cuts begin in earnest.

“Considering the scheduled output restraint policy will be fully enforced soon, steel mills will continue to curb production, adding pressure on raw material demand,” Orient Futures said in a note.

The most-active iron ore futures on the Dalian Commodity Exchange had climbed 0.9 percent to 464.5 yuan ($69.94) a tonne by 0319 GMT. Shanghai rebar prices picked up only 0.2 percent to 3,790 yuan a tonne.

Top steel cities Tangshan and Handan earlier order their steel mills to reduce capacity from the start of October, while more cities in smog-prone northern areas have issued alerts ahead of bouts of smog, asking steel mills to temporarily cut production to reduce emissions.

Despite those curbs, China churned out 72.36 million tonnes of crude steel in October, up 6.1 percent from a year earlier.

Stocks of imported iron ore at China’s ports rose 1.57 million tonnes to 137.87 million tonnes for the week ending Nov. 10, data compiled by SteelHome consultancy shows. SH-TOT-IRONINV

Chinese trader inventory of construction steel rebar continued to drop last week, to the lowest level since mid-August at 3.85 million tonnes, data from SteelHome showed. SH-TOT-RBARINV

“Steel demand will be hit even harder than steel supply, as construction has been stopped in Beijing, Tianjin and Hebei province,” Ming He, senior consulting manager at Wood Mackenzie warned in a note.