MANILA: Dalian coke futures surged on Tuesday to reach a fresh contract high as producers of the steelmaking raw material in China reduce output capacities to support prices.

The most-traded January 2021 coke contract on China’s Dalian Commodity Exchange rose as much as 1.7% to 2,168 yuan ($323.11) a tonne.

Dalian coke was on track for its sixth straight monthly gain, which along with higher iron ore prices, has squeezed steelmakers’ margins in the world’s top producer of the construction and manufacturing material.

Several Chinese coke producers have recently reduced capacities, and more are expected to follow suit, analysts at Sinosteel Futures Ltd said in a note.

“This will further aggravate the tight coke supply situation and support strong coke prices,” they said.

But weakening domestic demand for coke, the processed form of coking or metallurgical coal, should keep gains in check, they said.

Dalian coking coal edged up 0.4% to 1,354.50 yuan a tonne and was also on course to mark sixth straight months of gains, having hit a contract high last week.

China, the world’s top consumer of metallurgical and thermal coal, has reportedly recently informed key buyers to avoid coal from key supplier Australia, amid efforts to support domestic producers.

Dalian iron ore rose 0.3% to 769 yuan a tonne by 0252 GMT. Iron ore on the Singapore Exchange gained 0.3% to $112.88 a tonne.

China’s fifth Communist Party Plenum - which runs through Oct. 29 behind closed doors - is expected to lay out the framework for the country’s 14th five-year economic plan, which will have a broad impact on an array of commodity markets through 2025.

Construction steel rebar on the Shanghai Futures Exchange gained 0.1% while hot-rolled coil advanced 0.6%, but stainless steel slipped 1.1%.