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China steel snaps week-long rout as Beijing signals new crackdown
March 28, 2017 / 5:41 AM / 9 months ago

China steel snaps week-long rout as Beijing signals new crackdown

* Beijing signals fresh crackdown on excess

* Steel rise gives iron ore small boost

* Worries about high inventories linger

BEIJING, March 28 (Reuters) - Chinese steel rebar prices rose on Tuesday, snapping a week-long rout, as renewed optimism about capacity cuts in the world’s top steel producer offset lingering worries about high inventory levels and waning demand growth.

The gains helped give ore prices a brief lift on Tuesday, after its worst day in months the previous session.

Recovering from a six-week low hit on Monday, the most-active rebar contract on the Shanghai Futures Exchange was up 0.98 percent at 3,091 yuan ($449.14) a tonne at 0444 GMT.

The small rise came as Beijing signalled a renewed push to crack down on excess capacity, calling a meeting on Monday with steel producers to discuss steps to tackle zombie firms and ban low-grade steel.

The northeastern province of Liaoning has promised to close more than 10 million tonnes of low-grade steel capacity by the end of June this year.

In Hebei, the country’s major producing region, authorities launched a new probe into overproduction amid concerns mills have boosted output, despite mandatory capacity cuts as part of its war on smog.

Earlier this month, Beijing said it would get rid of another 50 million tonnes of steel capacity this year.

Futures on the Dalian Commodity Exchange were unchanged at 557.5 yuan ($81.01) per tonne, after early tentative gains ran out of steam. Prices hit an intraday high of 560 yuan earlier in the day.

Renewed scrutiny on excess steel ignited worries about demand for raw materials like iron ore, analysts said. On Monday, prices touched 541 yuan, their weakest since Feb. 8.

High inventories and the renewed clampdown on steel were “enough to make a bearish call on iron ore,” said Helen Lau, analyst at Argonaut Securities.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell 4.1 percent to $81.57 a tonne on Monday, its weakest since Feb. 6, according to Metal Bulletin.

Still, Lau said low steel mill inventories and high freight rates for imported iron ore suggest market conditions may be healthier than the port inventories would indicate.

Weekly data last week showed stockpiles at major ports in China, the world’s top steelmaker, rose for a second week, topping 132 million tonnes last week, the highest since at least 2004, according to SteelHome consultancy. SH-TOT-IRONINV

Concerns about demand from the building sector linger after Beijing imposed fresh curbs on lending in real estate in China last week. ($1 = 6.8820 Chinese yuan renminbi) (Reporting by Josephine Mason; Editing by Randy Fabi)

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