Shanghai steel futures rose for a third straight session on Tuesday after China’s top steelmaking city of Tangshan ordered steeper production curbs at industrial plants to limit pollution.
Tangshan already required its steel mills, cement and other plants to cut output from Oct. 12, a month earlier than schedule. The production cuts will last until March 2018. But the city told more industrial plants to make temporary, steeper cuts in production over the next three days, when smog is expected to worsen, the China Securities Journal reported on Monday. The most-active rebar contract for January delivery on the Shanghai Futures Exchange was up 1.4 percent at 3,746 yuan ($565) a tonne by 0209 GMT.
The price of rebar, a construction steel product, has climbed nearly 5 percent since Oct. 12 when Tangshan first implemented the output restrictions.
China’s crude steel output fell to a seven-month low in September and analysts have estimated that production may drop by up to 40 million tonnes over the winter period due to the government-imposed cuts. Production at member mills of the China Iron and Steel Association (CISA) stood at 1.84 million tonnes in early October, down 1.9 percent from the previous 10 days, Morgan Stanley analysts said, citing CISA data.
The utilisation rate at steel mills’ blast furnaces across China also dipped from the prior week to 81.8 percent as of Oct. 20, they said.
“In our view, the drop in (blast furnace) utilisation rate, both in Tangshan and nationwide, was likely the result of environmentally-related production cuts…,” they said in a note.
Iron ore on the Dalian Commodity Exchange was up 0.2 percent at 460 yuan per tonne.
Iron ore for delivery to China’s Qingdao port slipped 0.7 percent to $62 a tonne on Monday, according to Metal Bulletin.