* Iron ore rally not fundamentally justified - Macquarie
* China punishes nearly 700 officials in environmental
By Manolo Serapio Jr
MANILA, Dec 14 Steel and iron ore futures in
China retreated on Wednesday after a two-day run-up that lifted
the industrial commodities to multi-year highs amid Beijing's
efforts to address overcapacity in its steel sector.
China has cut 88 million tonnes of steel capacity this year
under an economic reform to slim down its glut-hit sectors,
nearly double the target of 45 million tonnes and helping spur
an 86 percent rally in steel futures this year.
Beijing's environmental crackdown has also hit heavy
polluters including mills, forcing them to reduce output or shut
China has punished nearly 700 more regional officials for
inadequately protecting the environment in the latest round of
rolling inspections, the state news agency Xinhua reported.
The most-active rebar on the Shanghai Futures Exchange
was down 2.5 percent at 3,381 yuan ($490) a tonne by
midday. The construction steel product rose to its highest since
April 2014 on Monday, hitting 3,557 yuan.
Iron ore on the Dalian Commodity Exchange dropped
3.4 percent to 614 yuan per tonne, after spiking to a nearly
three-year high of 657 yuan on Monday.
"Since steel shutdowns have been one of the main drivers of
the steel rally, in our view, we don't think iron ore rallying
is fundamentally justified, though it is clear that Chinese
market participants disagree," Macquarie analysts said in a
The retreat in steel prices also followed data on Tuesday
showing that China's crude steel output rose for a ninth
straight month in November, suggesting that Beijing's closure of
excess capacity has not stopped mills from producing more to
chase rising prices.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB
slipped 0.2 percent to $83.42 a tonne on Tuesday, a day after
hitting its strongest level since October 2014, according to
data from Metal Bulletin.
($1 = 6.9044 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Amrutha Gayathri)