Shanghai steel cuts losses, stays near six-year high amid curbs
Shanghai rebar futures pared losses on Thursday to close near a six-year peak reached in the prior session on expectations further output curbs in China could keep supply tight in the world’s top producer.
On top of ongoing restrictions at industrial plants in many Chinese cities, Beijing is planning to impose production curbs for a second winter in a row to tackle pollution.
The most active rebar on the Shanghai Futures Exchange closed down 0.3 percent at 4,227 yuan ($619) a tonne, but well off the day’s trough of 4,179 yuan. The construction steel product touched 4,278 yuan on Wednesday, its loftiest since April 2012.
Hot rolled coil, used in manufacturing, slipped 0.3 percent to 4,220 yuan per tonne. It peaked at 4,287 yuan on Aug. 7, a record high.
“Looking ahead, we expect both steel and iron ore prices to stay strong and we expect to see more shortage in steel ahead, especially in winter times as China’s steel production cuts may spread to more cities in 2018 than 2017,” Argonaut Securities analyst Helen Lau said in a note.
China plans to ask steel mills in six key cities – Tianjin, Shijiazhuang, Tangshan, Handan, Xingtai and Anyang – to cut 50 percent of their capacity during the heating season, and the rest of the Beijing-Tianjin-Hebei region will need to shut no less than 30 percent.
Iron ore prices have risen alongside steel even as the production limits curbed demand for the steelmaking raw material.
Iron ore on the Dalian Commodity Exchange ended 0.5 percent higher at 514 yuan a tonne after falling more than 1 percent intraday.
Coking coal dropped 1.5 percent to 1,200.50 yuan and coke rose 1.7 percent to 2,469 yuan.
Beijing late on Wednesday said it would slap additional tariffs of 25 percent on $16 billion worth of U.S. imports, in retaliation to news the United States plans to begin collecting 25 percent extra in tariffs on $16 billion of Chinese goods from Aug. 23.