Chinese steel futures rose on Wednesday after the country's biggest steelmaking city, Tangshan, said it would deepen output curbs over the summer, raising concerns of tight supplies in the market. Tangshan, home to 64 steelmakers, has ordered steel mills, coke producers and utilities to cut output further starting from July 20 until August 31, according to a document from the city government. This is the latest step to curb smog in one of the country's most polluted areas.
Sintering machines and blast furnaces at mills will be major targets but the document did not instruct factories to cut output by a certain amount. Analysts expect the latest restriction in Tangshan could reduce production by up to 150,000 tonnes of hot steel a day.
Benchmark construction steel rebar futures on the Shanghai Futures Exchange (ShFE) closed up 0.5 percent to 3,879 yuan ($582.79) a tonne even as other major commodities fell amid fears of and escalated Sino-US trade row. Washington on Tuesday said it would impose a 10 percent tariff on an extra $200 billion worth of Chinese imports, including hundreds of food products as well as tobacco, coal, chemicals, and consumer electronics.
Zinc futures on the ShFE plunged more than 6 percent and copper futures tumbled as much as 4.6 percent. Steelmaking raw ingredients coke and coking coal slipped amid the broad commodity selloff. Dalian coking coal fell as much 3.1 percent to its lowest level in three months, while coke prices dipped by as much as 1.3 percent.
The most-active iron ore contract for September delivery on the Dalian Commodity Exchange settled up 0.5 percent at 463.5 yuan a tonne after falling by as much as 2.5 percent during early trading. "The most direct trigger for the selloff is the escalated trade war between the US and China, stoking anxiety among investors," said Richard Lu, steel analyst at CRU in Beijing. "But the real impacts of the trade row still need to be assessed."
Benchmark steel billet prices in Tangshan rose 50 yuan to 3,680 yuan a tonne on Tuesday, while spot steel product prices rose 0.5 percent to 4,312.22 yuan a tonne, data from Mysteel consultancy showed. Wuhan Iron and Steel co, now part of China's biggest steel maker China Baowu Steel Group Co, said in a statement on Tuesday that it will raise wire rod prices for August delivery by 100 yuan a tonne.
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