MANILA: Shanghai rebar steel futures rallied more than 5 percent on Friday to trade near a 30-month high after China said it has cut 88 million tonnes of steel capacity this year, nearly double its target.
Large-size Chinese steelmakers had phased out 40.75 million tonnes of production capacity up to September and reductions by smaller companies brought the total to 88 million tonnes, Chinese Vice Premier Liu Yandong said on Thursday.
That was well above China's pledge to cut 45 million tonnes in steel production capacity this year and puts it well ahead of its plan to reduce its steel capacity by 100-150 million tonnes over the next three to five years, analysts say.
"China may be able to achieve its target by next year," said Helen Lau, analyst at Argonaut Securities in Hong Kong.
"Capacity is being controlled and the steel market may be rebalanced quickly."
Rebar, a construction steel product, rose as much as 6.7 percent to 3,145 yuan ($455) a tonne on the Shanghai Futures Exchange, just shy of its 7-percent trade limit.
That was near its Nov. 14 peak of 3,220 yuan, the highest since May 2014. It was up 5.4 percent at 3,107 yuan a tonne by midday.
Gains in steel pulled up raw material iron ore. The most-traded iron ore on the Dalian Commodity Exchange was last up 3 percent at 643.50 yuan a tonne. Earlier, it hit 655 yuan, near Thursday's 33-month high of 658.50 yuan.
Stronger futures should also push up spot iron ore prices which have rebounded almost 6 percent this week after dropping 8.8 percent last week.
Iron ore for delivery to China's Qingdao port <.IO62-CNO=MB> rose 1.4 percent to $76.93 a tonne on Thursday, according to Metal Bulletin.
The surging volatility in China's iron ore futures is sending global prices on a roller-coaster ride, spelling risks for traders and steel mills, some of whom are losing faith in a market swayed by speculative Chinese money.
On Wednesday, the most-active iron ore contract on Dalian posted its most volatile trading day since July 2015 when futures prices hit their lowest since the contract began in 2013, based on Thomson Reuters data.
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