* Limited steel supply as China sustains pollution fight
* Strengthening economy also boosting sentiment
* Traders' rebar stockpiles rise for 3rd week in a row
By Manolo Serapio Jr
MANILA, Dec 12 Chinese steel futures surged to
their highest in 32 months on Monday as Beijing's resolve to
tackle a glut helped tighten supply, lifting raw material iron
ore to its strongest in almost three years.
The two commodities resumed their rally after Friday's
pullback that followed a six-day run-up, also bolstered by signs
of recovery in the world's No. 2 economy.
The most-active rebar on the Shanghai Futures Exchange
climbed as much as 7 percent to hit its upside limit of
3,557 yuan ($514) a tonne, its loftiest since April 2014. It
closed up 3.6 percent at 3,444 yuan.
Iron ore on the Dalian Commodity Exchange closed
3.4 percent higher at 635.50 yuan per tonne after earlier
peaking at 657 yuan, a level last seen on January 2014.
Steel supply is tightening as the Chinese government
continues to restrict production by heavy industries including
steel and cement in its fight against pollution, traders said.
"Many steel mills have lifted their offer price over the
weekend amid limited supply," said a trader in Shanghai.
While seasonal steel demand is lean during winter, some
traders are restocking on expectations that the market will
remain strong going forward, he said.
Stockpiles of rebar among Chinese traders rose for a third
straight week to 3.79 million tonnes on Dec. 9, according to
data tracked by SteelHome consultancy. SH-TOT-RBARINV
Signs of a big revival in China's economy also continued to
boost sentiment towards commodities.
China's producer prices rose at the fastest pace in more
than five years in November, boosting industrial profits and
giving firms more cash flow to pay off mountains of debt, data
showed on Friday.
"Metals producers who are focused on smelting such as copper
and aluminium and steel production will see their profit growing
on the back of enlarged revenue bases," Argonaut Securities said
on the impact of the surge in producer prices.
Tracking the rally in futures, iron ore spot prices also
climbed above $80 a tonne last week. Iron ore for delivery to
China's Qingdao port .IO62-CNI=SI stood at $81.66 a tonne on
Friday, gaining 5 percent last week, according to Metal
The spot benchmark hit $82.25 on Wednesday, the highest
since October 2014.
($1 = 6.9146 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Richard Pullin and