Steel and iron ore futures in China edged higher on Tuesday, but gains were capped as trading activity winds down ahead of the week-long Lunar New Year break that kicks off on Thursday. Many traders and some workers at mills in China, the world's top steel producer, have taken leave and expectations are the market may only see a sharp revival in trading appetite next month.
"I don't see any major restocking activity soon after the holiday," said an iron ore trader in Shanghai. "Maybe steel demand will only pick up in March, but how strong that recovery will be I'm not sure."
The most-active rebar contract for May delivery on the Shanghai Futures Exchange closed up 0.4 percent at 3,921 yuan ($619) a tonne. Lending support to steel prices is a plan by China's top steelmaking city Tangshan to extend production restrictions beyond the end of the winter heating season on March 15, traders said. "That will have some impact on the market this year, but we also expect some new capacity to be added," the Shanghai trader said.
Tangshan is among 28 Chinese cities that were ordered by the government to cut steel output by as much as half from mid-November as part of a campaign against air pollution. It produces 12 percent of China's steel. Iron ore on the Dalian Commodity Exchange rose 1.3 percent to 529 yuan a tonne. Coking coal gained 0.6 percent to 1,364.50 yuan per tonne and coke added 0.3 percent to 2,111.50 yuan.
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