* Shanghai rebar, Dalian iron ore hit fresh multi-week highs
* China capacity cuts bode negatively for iron ore demand
By Manolo Serapio Jr
MANILA, Jan 12 Chinese rebar steel futures rose
for a fourth straight day on Thursday amid Beijing's campaign to
shave excess steel production capacity, helping stretch gains in
raw material iron ore.
The rally in both commodities extended last year's surge
that came after years of losses, with analysts saying steel
prices may remain strong as China's resolve to address
overcapacity tightens supply.
China this week unleashed its boldest reform plan so far for
the steel sector, saying it will eliminate all production of
low-quality steel products by the end of June.
The world's top steel producer also halted eight steel
projects in top steelmaking province Hebei, according to local
"While some of the push to close steel overcapacity reflects
supply-side policy, the added impetus over recent weeks reflects
growing pollution concerns," Commonwealth Bank of Australia
analyst Vivek Dhar said in a note.
But Dhar said that while a resulting decline in steel output
"may be positive for steel prices, (it) bodes negatively for
iron ore demand and prices."
The most-active rebar on the Shanghai Futures Exchange
closed up 1.1 percent at 3,207 yuan ($464) a tonne,
after earlier hitting its strongest level since Dec. 19 at 3,260
Iron ore on the Dalian Commodity Exchange ended
1.7 percent higher at 607.50 yuan per tonne, having initially
touched a four-week top of 617 yuan.
Stronger futures have spurred a similar rally in spot iron
ore prices, with the market benchmark back above $80 a tonne for
the first time this year.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB
climbed 1.2 percent to $80.41 a tonne on Wednesday, rising for a
third day, according to Metal Bulletin.
But traders said there had not been a lot of Chinese steel
mills building iron ore inventories ahead of the week-long Lunar
New Year break at the end of January.
"Supply is still quite good and I don't think you will see
any aggressive restocking," said a Shanghai-based trader.
Stocks of imported iron ore at major Chinese ports reached
116.7 million tonnes on Jan. 6, the biggest since at least 2004,
according to SteelHome consultancy.
($1 = 6.9105 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)