May 19, 2017 / 2:33 AM / 3 months ago

China steel headed for 2nd best week this year amid crackdown

* Shanghai rebar hits six-week high

* Spot iron ore on course to end week little changed

By Manolo Serapio Jr

MANILA, May 19 (Reuters) - Shanghai rebar steel futures climbed to a six-week peak on Friday and were on track for their biggest weekly increase since January, supported by worries over tighter supply as China sustains a crackdown against polluting producers.

Tangshan city in Hebei province, China's biggest steelmaking region, has an ongoing campaign through the end of May to suspend and fine mills that fail to meet emission standards.

"It would take a while for any suspended mills to restart their production. So maybe steel prices can keep improving till middle of next month, then we will see a slowdown in the market again," said a Shanghai-based trader.

The most active rebar on the Shanghai Futures Exchange rose as far as 3,223 yuan ($468) a tonne, its loftiest since April 6. The construction steel product was up 3 percent at 3,213 yuan by 0220 GMT and has gained 7 percent so far this week.

Declining rebar inventories also pointed to firm demand on the ground, traders said.

Stocks of rebar at Chinese traders have fallen 46 percent from a 10-month high in February to 4.51 million tonnes as of May 12, according to data tracked by SteelHome consultancy. SH-TOT-RBARINV

Amid improving steel prices, futures of raw material iron ore also advanced although gains were capped by plentiful supply at home.

Inventory of imported iron ore at 46 Chinese ports reached 134.25 million tonnes on May 12, up 2.3 million tonnes from the previous week, SteelHome said. SH-TOT-IRONINV

It was the biggest such inventory since SteelHome began compiling the data in 2004.

Iron ore traded on the Dalian Commodity Exchange rose 0.6 percent to 477 yuan per tonne.

Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slipped 1 percent to $61.60 a tonne on Thursday, according to Metal Bulletin. The spot benchmark was up 0.4 percent so far this week. ($1 = 6.8938 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Richard Pullin)

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