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UPDATE 1-China's steelmaking raw materials rise as capacity curbs may fall short
November 2, 2017 / 7:29 AM / a month ago

UPDATE 1-China's steelmaking raw materials rise as capacity curbs may fall short

* Coking coal, coke, iron ore futures all higher

* Steel output curbs may be less than expected

* Steel rebar futures rise slowly (Updates close prices)

SHANGHAI, Nov 2 (Reuters) - Chinese coking coal and iron ore futures rallied on Thursday as capacity curbs in top steelmaking city Tangshan may fall short of expectations, rebounding as prices of the two raw materials have nearly touched their import and production costs.

Tangshan, in northern Hebei province, will temporarily ban the use of total 18.21 million tonnes of its ironmaking capacity from mid-November until mid-March. Ironmaking by blast furnaces is a key procedure for making steel.

The most traded coking coal futures on the Dalian Commodity Exchange soared to a session peak of 1,142 yuan ($173.14) a tonne, their highest since Oct. 23.

The contact closed 5.7 percent higher at 1,139 yuan a tonne, posting the biggest daily gain in about three weeks.

China has planned to curb industrial production in 28 cities during the upcoming winter to tackle hazardous smog.

Tangshan has ordered steel mills to ban use of capacities at different levels in terms of a range of standards, instead of “one-size-for-all” cut, raising expectation that steel production might not fall as much as expected.

“The temporary (ironmaking) capacity cut is lower than the previous market expectation, and mills may not cut production as much as we expected, but the details haven’t been announced yet, so the outlook is uncertain,” said Bai Jing, an analyst with Galaxy Futures in Beijing.

“Meanwhile, iron ore and coke have already fallen to their cost levels, which has lent support to prices,” Bai said.

On the Dalian exchange, iron ore on climbed 2.2 percent to 442 yuan a tonne, while coke futures jumped 3 percent to 1,746 yuan a tonne.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 1.4 percent to $59.35 a tonne on Wednesday, according to Metal Bulletin.

On the steel side, the most active rebar contract on the Shanghai Futures Exchange rose 0.8 percent to 3,642 yuan a tonne.

$1 = 6.5885 Chinese yuan Reporting by Ruby Lian and Josephine Mason; Editing by Tom Hogue and Subhranshu Sahu

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