Chinese steel futures climbed more than 4 percent to a one-month high on Monday amid production curbs in the top steelmaking city of Tangshan that could limit supply in the short term.
China’s top steel-making city of Tangshan has ordered mills in and near the area to cut production from June 14-21 to ease air pollution, similar to an order it made in May, according to traders.
The most-traded rebar, or reinforcing steel used in construction, on the Shanghai Futures Exchange was up 4.1 percent at 2,165 yuan ($329) per tonne, just off a session high of 2,166 yuan, its strongest since May 11.
Tangshan is the biggest city in Hebei province, which accounts for more than 20 percent of China’s steel output.
The output cuts could limit appetite for raw material iron ore, traders said.
“No one wants to buy iron ore for their production. Steel production is being curbed due to environmental pressure and various meetings in Tangshan area,” said an iron ore trader in Singapore.
The events include the Hebei International Trade Fair that runs from June 14-21, a Beijing trader said.
Iron ore futures also rose, but the gains were only half that of Shanghai rebar’s. The most-active iron ore on the Dalian Commodity Exchange was last up 2 percent at 375 yuan a tonne.
The curbs in Tangshan may help limit China’s output this month after production rose 1.8 percent from a year ago to 70.5 million tonnes in May, according to government data. That was near the record high of 70.65 million tonnes in March.
A rally in steel prices earlier this year spurred once-shut Chinese mills to restart operations. But demand failed to keep pace with rising demand, causing Shanghai rebar to fall more than 20 percent last month.