BEIJING: Chinese steel futures rose slightly on Wednesday, but gains were kept in check as investors eyed the expected expiry of winter restriction on steel production at the end of the week.
"Despite booming demand in downstream sectors, the market remains worried about increasing supply ... as investors generally expect that output curbs will be eased in April," said analysts from Orient Futures in a note.
Local governments in northern China ordered heavy industry, including steel mills, to cut production in November to March in order to improve air quality. But they have not said if the restrictions will be completely removed in April.
Some steel mills resumed some operations last week, with utilisation rates rising to 63.4 percent as of March 22 from 62.3 percent a week earlier, according to data compiled by Mysteel consultancy.
Benchmark Shanghai rebar prices climbed 0.3 percent to 3,711 yuan ($552.06) a tonne when market closed at 0700 GMT.
Hot-rolled coil, a manufacturing-grade steel product, edged up 0.5 percent to 3,675 yuan a tonne.
Still, spot steel prices have fallen for three days in a row as of Tuesday, according to Mysteel data, reflecting fragile sentiment among traders amid concerns that slower economic growth could check demand.
"Downstream processors are reluctant to buy steel products amid falling profit margins ... They tend to operate with low inventory to reduce the risk of declining steel prices," said Orient Futures.
On futures markets, steel-making raw ingredients drifted higher alongside steel prices, but the cautious attitude also weighed.
The most-active iron ore contract on the Dalian Commodity Exchange stayed little changed at 613.5 yuan.
Fitch Ratings said it had raised price assumptions for iron ore with 62 percent iron content to $75 a tonne from $60 a tonne for 2019 and to $70 from $55 for 2020, due to supply disruption following Vale's tailings dam failure at Feijao.
Coking coal gained marginally to 1,229.5 yuan on Wednesday, while coke lost 1 percent to 1,948 yuan.
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