BEIJING: China’s benchmark iron ore futures jumped more than 7% on Tuesday, rallying for a third straight session, boosted by reports that steel hub Tangshan plans to ease requirement for production cuts at its mills.
The Tangshan government held a symposium on Monday, mulling to lower output curtailment ratio for some mills that had finished ultra-low emission upgrades, according to state-backed Securities Times, citing media report.
Authorities had urged local long-process steel producers to cut production by 30%-50% in March to improve air quality, sparking supply concerns as the city accounts for more than 13% of China’s total crude steel output.
But an industry source told Reuters the plan is still under discussion and has not been officially approved yet.
Prices for steelmaking ingredients rose on hopes of increasing demand. The most-traded iron ore futures on the Dalian Commodity Exchange, for September delivery, surged 7.3% to 1,170 yuan ($183.53) a tonne.
Spot prices of iron ore with 62% iron content for delivery to China, rose $8 to $200.5 per tonne on Monday, according to SteelHome consultancy.
Dalian coking coal and coke futures both soared 4.7% to 1,872 yuan and 2,586 yuan per tonne, respectively.
Citi Research analysts said in a note the move by Tangshan could put some pressure on steel prices in the near run as the market heads into the weak season.
“However, we still expect more production measures in other provinces in 2H in order to reduce carbon emissions.”
China’s environment ministry said it would tighten approvals for energy-intensive and polluting projects such as steel, aluminium and coking.