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China steel futures extend rally on potential production limits
Source:Sydney Morning Herald   Time:2017-04-28 11:06:41

Shanghai rebar steel futures advanced for a third straight session on Thursday, supported by market expectations of production curbs ahead of a key summit in Beijing.

There has been unconfirmed market talk this week of possible production curbs in areas surrounding Beijing, including top steel-producing province Hebei, ahead of a mid-May summit in the capital.

China typically orders industrial plants to cut or limit production to help clear the skies ahead of a major event such as when it hosted the G20 Summit in Hangzhou last year.

China will hold its New Silk Road summit on May 14-15 and steel mills in surrounding Hebei province and Tianjin city were said to be likely to cut or curb output for 20 days, according to market participants who have heard the market discussion.

But a steel mill in Hebei has not received any government notice yet on production cuts, according to an official who declined to be named because he is not authorised to speak to media.

Still, there is talk among mills that some production processes that may cause pollution may be halted, the official said.

The most-active rebar on the Shanghai Futures Exchange climbed 1.2 per cent to close at 3016 yuan ($US437.48) a tonne. In the previous session, the construction steel product hit 3032 yuan, its strongest since April 10.

The increase in steel prices lifted raw material iron ore, helping it recover from its morning drop.

The most-traded iron ore on the Dalian Commodity Exchange closed up 0.5 per cent at 506 yuan per tonne, after earlier touching a session low of 492 yuan.

"If there's restriction on steel production, that would reduce demand for iron ore," said the Shanghai trader.

There is still ample supply of iron ore in China, with imported stocks at its ports near their highest level in more than a decade.

Port inventory stood at 129.60 million tonnes on April 21, not far below the 132.45 million tonnes reached in March which was the highest since 2004, according to SteelHome.

Iron ore for delivery to China's Qingdao port slipped 20 US cents to $US66.42 a tonne on Wednesday, according to Metal Bulletin.

Shares in Vale slumped the most in two weeks, as executives signalled lacklustre trends for iron ore prices this year.

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