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Shanghai rebar hits 6-year high over production curbs, power shortages

The price of China’s rebar construction steel hit its highest in more than six years on Tuesday amid concerns over tight supply due to electricity rationing and China’s plans to curb industrial production during winter.

The Shanghai Futures Exchange most-active rebar contract for October delivery on the hit 4,266 yuan ($624.20) a tonne, its highest since April 2012. The contract closed up 1.6 percent at 4,237 yuan a tonne.

Some steel mills in Hebei, China’s top steelmaking province, have been ordered to reduce output because of power shortages in the region.

Electricity rationing has hit around 30 percent of production capacity, with steel mills being asked to work only during off-peak hours when power demand is lower.

Environmental pressure on industry has increased across the country after Beijing issued a three-year anti-pollution action plan and draft rules to clear smog in 28 northern cities in the coming winter.

Sweeping measures are expected across heavy industries including steel, coke, non-ferrous and construction materials aimed at reducing emissions during the winter when temperatures plummet and homes crank up the heat, drawing heavily on the nation’s coal-fired power plants.

The southern region of Guangxi aimed to cut the average concentration of hazardous floating particles, known as PM2.5, by 15 percent by 2020 from the level recorded in 2015, state-owned Xinhua News said.

Guangxi will reduce capacity in the steel, non-ferrous smelting and alcohol sectors and lift the threshold for capacity swapping in those industries.

“Higher environmental standards have strengthened market expectations of stricter rules of production curbs … We expect the steel market to maintain a positive trend in a short term,” said analysts from Huatai Futures.

Spot rebar prices edged 0.2 percent higher to 4,451.33 yuan a tonne on Monday, data from Mysteel consultancy showed.

Steelmaking ingredient iron ore on the Dalian Commodity Exchange rose for a third session. It climbed 0.8 percent to 503.5 yuan a tonne on Tuesday after surging nearly 7 percent in the previous session.

Market also expects more stringent inspections on mines across the country, which might lead to tight supplies, after four workers were killed in an explosion at a small coal mine in southern China last night.

Coking coal prices pulled back before market close at GMT 0710, down 1.1 percent to 1,209 yuan a tonne. Coke rose as much as 3.4 percent, its highest since August 2011, but closed 0.4 percent lower at 2,442 yuan.

Source: Reuters

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