China steel futures rise ahead of output curbs by Tangshan city

1 November 2017

Chinese steel futures rose on Wednesday as the top steelmaking city of Tangshan will start to curb its iron production capacity amid the government’s push to fend off winter smog.

Tangshan, in northern China’s Hebei province, plans to temporarily ban production from a total of 18.21 million tonnes of ironmaking capacity from mid-November until mid-March.

Ironmaking by blast furnaces is a key procedure for making steel.

Steel supplies in the world’s top producer will be hit by the temporary ban on the capacity use, and the government is expected to step up efforts to curb steel production in more cities to clear its skies in the winter heating season.

The most active rebar on the Shanghai Futures Exchange rose 1.3 percent to 3,642 yuan ($548.77) a tonne by 0248 GMT.

“The capacity curb is slightly lower than market expectation. And what really matters is if the production cut can be implemented thoroughly, which will depend on the weather, so the outlook remains uncertain,” said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.

Iron ore on the Dalian Commodity Exchange rose 2.6 to 437 yuan a tonne by 0248 GMT.

Among other steelmaking raw materials, Dalian coal future climbed 0.7 percent to 1,090 yuan a tonne and coke futures jumped 2.3 percent to 1,713.5 yuan a tonne.

Iron ore for delivery to China’s Qingdao port dropped 0.4 percent to $58.52 a tonne on Tuesday, according to Metal Bulletin.