Dalian iron ore rallies 6% as output curbs lift steel

[MANILA] Chinese iron ore futures surged more than 6 per cent to their strongest level in two weeks on Monday, tracking firmer steel prices after China's top steel producing province surpassed its capacity reduction targets for the year.

Expectations that demand for the steelmaking raw material would pick up after China's steel production curbs over winter also underpinned prices.

Hebei province has slashed 25.55 million tonnes of its steelmaking capacity so far this year, ahead of its annual target, the official Xinhua News agency reported on Friday.

To further curb pollution during winter, which lasts from November through March, Hebei would also limit steel and iron output by 50 per cent in major producing cities including Tangshan, Handan and Shijiazhuang, Xinhua reported.

The measures are in line with China's output restrictions for industrial plants including steelmakers, helping tighten supply. The most-traded rebar on the Shanghai Futures Exchange rose as far as 3,780 yuan (S$777.65) a tonne, its loftiest since Oct 25. It closed up 2.5 per cent at 3,769 yuan.

Steel's gains helped push up prices of raw materials iron ore and coking coal.

Iron ore on the Dalian Commodity Exchange climbed 6.1 per cent to end at 468 yuan per tonne, just off the day's peak of 469 yuan, the highest since Oct 23. Coking coal finished 2.7 per cent higher at 1,166.50 yuan per tonne, after hitting a nearly three-week top of 1,174.50 yuan.

While the recent curbs on steel production in China have weighed on spot iron ore price, ANZ commodity strategist Daniel Hynes said "the market is getting increasingly bullish about demand in 2018." "With expectations of underlying demand to remain strong, this should see pent up demand hit the market when the curbs end," Hynes said in a note.

Iron ore for delivery to China's Qingdao port stood at US$59.88 a tonne on Friday, up 0.2 per cent from Thursday, according to Metal Bulletin. The spot benchmark hit US$58.52 on Oct 31, the lowest in more than four months.

REUTERS