China iron ore bounces back from selloff driven by pollution curbs

China's iron ore futures rose for a second straight session on Wednesday, recovering from what some analysts viewed as an exaggerated selldown in reaction to anti-pollution output curbs in the country's top steel-producing city of Tangshan.

The most-traded May iron ore on the Dalian Commodity Exchange ended the morning trade 2.3% higher at 1,047.50 yuan ($160.60) a tonne.

However, the front-month April contract on the Singapore Exchange dropped 1% to $153.55 a tonne, after a 2.6% gain in the previous session.

Dalian iron ore slumped to its lowest in six weeks on Monday as investors were concerned that more steel production cuts in China could significantly dampen demand for the raw material.

A notice that circulated recently in China's steel industry threatened output cuts between 30% and 50% for pollution defaulters in Tangshan, with the restriction seen being expanded to include other steel-producing cities.

"Despite the recent market focus on the tightening of Chinese emissions regulations, we think they are unlikely to materially cut steel production," Justin Smirk, senior economist at Westpac Group, said in a March 17 commentary.

The move is not expected at a time when Beijing is maintaining support for the economy with stimulus policies, he said, adding that China can instead reduce emissions by forcing smaller, pollutive mills to close and allowing larger and cleaner mills to take up the slack.

China, which accounts for more than half of the world's steel output, can also increase the usage of metal scraps and less pollutive high-grade iron ore in blast furnaces, he added.

The benchmark 62% Fe iron ore's spot price rebounded to $161 a tonne on Tuesday from a seven-week low, SteelHome consultancy data showed.

Rebar on the Shanghai Futures Exchange rose 1.2%, while hot-rolled coil advanced 1.1%. Stainless steel edged 0.4% higher.

Dalian coking coal slipped 0.2% while coke gained 0.8%.