Benchmark iron ore price in China extended gains to a third straight session, jumping more than 5% on Tuesday, on media reports that steel hub Tangshan plans to ease the requirement for production cuts at its mills.
The Tangshan government held a symposium on Monday, mulling to lower output curtailment ratio for some mills that had finished ultra-low emission upgrades, according to state-backed Securities Times, citing media report.
Tangshan authority had urged local long-process steel producers to cut production by 30%-50% in March to improve air quality, sparking supply concerns as the city accounts for more than 13% of China’s total crude steel output.
Prices for steelmaking ingredients increased on hopes of increasing demand.
The most-traded iron ore futures on the Dalian Commodity Exchange, for September delivery, jumped 5.8% to 1,153 yuan ($181.09) a tonne.
Spot prices of iron ore with 62% iron content for delivery to China rose $8 to $200.5 per tonne on Monday, according to SteelHome consultancy.
Dalian coking coal inched up 0.6% to 1,799 yuan a tonne, while coke futures rose 2.9% to 2,541 yuan per tonne.
Citi Research analysts said in a note the move by Tangshan government could put some pressure on steel prices in the near run as the market heads into the weak season.
“However, we still expect more production measures in other provinces in 2H in order to reduce carbon emissions,” according to the note.
China’s environment ministry said on Monday it would tighten approvals for energy-intensive and polluting projects such as steel, aluminum and coking.
Construction-used steel rebar on the Shanghai Futures Exchange, for October delivery, fell 1.5% to 4,955 yuan per tonne.
Hot-rolled coils declined 2.5% to 5,259 yuan a tonne.
Shanghai stainless steel futures, for July delivery, however, gained 2.7% to 16,050 yuan per tonne.
($1 = 6.3671 Chinese yuan)
(By Min Zhang and Shivani Singh; Editing by Uttaresh.V)