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Shanghai steel futures extend gains to 7th day on output curbs

Chinese steel futures rose for a seventh straight session on Thursday on lingering concerns over supply prospects as the world’s top producer of the construction and manufacturing material seeks to reduce output this year.

Construction steel rebar and hot-rolled coil contracts on the Shanghai Futures Exchange touched their strongest levels since June 15, before trimming gains, helping Dalian iron ore recover after two days of declines.

Shanghai rebar ended daytime trading 0.8% higher at 5,146 yuan ($796.37) a tonne, while hot-rolled coil – used in car bodies and home appliances – gained 0.5% to 5,428 yuan a tonne.

Steelmaking ingredient iron ore on the Dalian Commodity Exchange climbed 1.1% to 1,166 yuan a tonne.

China has vowed to ensure its crude steel output falls in 2021 and look into the implementation of steel capacity cuts since 2016 as the country aims to meet emission reduction goals.

In the eastern Chinese province of Anhui, steel mills have been required to “formulate a crude steel production reduction task breakdown table” and told that “actual output in 2021 is not allowed (to be) more than 2020 (levels),” according to Sinosteel Futures analysts.

“According to this requirement, after the June output is estimated, it is expected that the crude steel output from July to December 2021 will need to be reduced by about 3.5 million tonnes year-on-year, with an average daily reduction of 19,000 tonnes,” they said in a note.

Iron ore on the Singapore Exchange was up 1% at $205.20 a tonne, as of 0709 GMT. Spot prices also remained well-supported above $200 a tonne.

While steel output curbs should also reduce demand for ingredients, Chinese mills are likely trying to maximize output by using more of high-grade iron ore.

Shanghai stainless steel slipped 0.9%.

Dalian coking coal fell 2%, while coke slumped 2.2%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)

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