Chinese steel futures dropped for a sixth straight session on Wednesday, surrendering initial gains after Beijing’s state planner warned the economy is facing increasing risks in the second half of the year.
The head of China’s National Development and Reform Commission said the government needs to exert bigger effort to achieve key development goals.
Analysts, however, believe steel prices will remain supported by production curbs as Beijing pushes to limit pollution.
The most actively traded January rebar on the Shanghai Futures Exchange ended 1.5 percent lower at 4,160 yuan ($605) a tonne, after rising as much as 1.3 percent earlier in the session.
The pullback in the price of the construction steel product followed a rally to 4,418 yuan on Aug. 22, its highest since September 2011, which was fuelled by expectations that production restrictions due to expire on Friday in the top steelmaking city of Tangshan in Hebei province could be extended.
“We remain very positive about steel prices because of the supply cuts. The supply-side reform is (still) the story,” said Helen Lau, analyst, Argonaut Securities in Hong Kong.
A possible extension in output curbs in Tangshan would suggest the summer restrictions would continue through winter, although there has been no official confirmation yet from the local government.
Northern mills will be required to cut capacity by 30 percent-50 percent over winter, the second straight year such measures will be enforced, according to a draft plan released earlier this month.
There was market talk on Wednesday that Jiangsu Shagang, the biggest private-owned steel mill in China, and its subsidiaries were ordered to shut their blast furnaces and some sintering machines in all of November, when an international summit will be held in the neighbouring region of Shanghai.
An official at Jiangsu Yonggang, a subsidiary of Shagang, told Reuters that his mill has not received any such notice from the government.
Prices of steelmaking raw materials iron ore and coking coal retreated alongside steel. January iron ore on the Dalian Commodity Exchange eased 0.4 percent to 480 yuan a tonne and coking coal fell 1.6 percent to 1,244.50 yuan.
Coke jumped 1.3 percent to 2,579.50 yuan per tonne.
Spot iron ore for delivery to China’s Qingdao port .IO62-CNO=MB was little changed at $65.88 a tonne on Tuesday, according to Metal Bulletin.
Source: ReutersPrevious Next