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China steel, iron ore rise after Beijing flexes muscle

Beijing assured industry that it would maintain policy support, causing prices to rise 1.6% a tonne

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The jump in steel prices was also driven by concerns over tight supply as the top steel-making city of Tangshan issued a second-level smog alert, effective from April 20-25.

Beijing

CHINA'S steel and iron ore futures rose on Monday after last week's recording of their worst weekly performance in several months, buoyed after Beijing said it would maintain policy support for the economy.

A top decision-making body of the Communist Party on Friday said that support would come as China's economy still faces "downward pressure" and difficulties despite better-than-expected first quarter growth.

The world's second-largest economy last week reported first quarter growth at 6.4 per cent as industrial production jumped sharply and consumer demand showed signs of improvement. More economic stimulus policies are widely expected. Benchmark Shanghai rebar prices rose 2.9 per cent shortly after the market opened. They settled up 1.6 per cent at 3,773 yuan (S$763) a tonne.

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The jump in steel prices was also driven by concerns over tight supply as the top steel-making city of Tangshan issued a second-level smog alert, effective from April 20-25.

Steel mills in the Chinese city were ordered to halve their shaft furnace operations and halt sintering machines by at least 40 per cent or even shut down, based on their emission levels, during the alert.

Meanwhile, analysts generally expect Tangshan to tighten its anti-smog measures in the coming months, which could curb supplies in the market. "If Tangshan strictly implements production restrictions in May, we would see steel supply falling more sharply than demand," Gu Meng, analyst from Orient Futures, said in a note.

"With increasing steel prices and therefore profit-margins at mills, prices of steel-making raw ingredients will also go up despite decreasing demand," the analyst added.

The most-traded iron ore contract on the Dalian Commodity Exchange, for September delivery, climbed 1.3 per cent to 627 yuan a tonne. REUTERS