* Steel rebar snapped 6-year losing streak in 2016
* As smog returns, factories forced to cut output
* Turnover low after new year holiday
By Josephine Mason and Muyu Xu
BEIJING, Jan 3 Chinese steel prices started the
new year on an upbeat note as a prolonged bout of toxic smog
across the north of the country boosted expectations of lower
output in the world's top producer even as demand growth slows.
"Prices in the spot market are still strong, as smog in
northern China has halted production of steel mills. Meanwhile,
the government has been stepping up environmental inspections,"
said Tang Zuochu, steel analyst at Baocheng Futures.
The most-active rebar contract for May delivery on the
Shanghai Futures Exchange was up 0.6 percent at 2,927
yuan ($420.87) per tonne at 0358 GMT.
Turnover was low as trading resumed after markets were
closed on Monday for the new year holiday.
Heavy smog blanketed northern parts of China at the weekend
and was expected to persist until Thursday, forcing hundreds of
factories including steel mills to scale down production or
While that could be bullish for supplies, curbs to heavy
manufacturing are also likely to hurt demand for metal. Concerns
about slowing demand growth have weighed on sentiment in recent
Still, investors focused on Tuesday on the potential impact
of Beijing's supply-side reforms.
Last week, China warned local officials over failures to
curb industrial overcapacity after discovering two firms making
Jiangsu Huada Steel Co Ltd was found to be making steel
using outdated equipment and failing to meet quality standards,
while Hebei Anfeng Steel Co Ltd had built new steel smelting
projects without proper approvals.
The government-enforced capacity cuts may in the long term
help erode global oversupply. China's annual crude steel surplus
is estimated at around 300 million tonnes, three times the
annual output of the world's second-biggest producer, Japan.
Steel prices snapped their six-year losing streak in 2016,
surging more than 60 percent on better-than-expected demand from
construction and infrastructure and soaring costs for coking
coal due to government-enforced coal mine closures.
Iron ore on the Dalian Commodity Exchange was up
0.2 percent at 555.5 yuan a tonne.
($1 = 6.9546 Chinese yuan renminbi)
(Editing by Richard Pullin)