BEIJING: Chinese stainless steel futures surged more than 5% on Tuesday, boosted by tight supply concerns as producers cut production, while strong raw material prices also offered support.

“Domestic stainless steel firms are stepping up maintenance in the first quarter, while affected by the Spring Festival holidays and Beijing Winter Olympics; overall production is expected to be limited,” analysts with Jinrui Futures wrote in a note.

Stainless steel is also underpinned by nickel prices cue to tight spot cargoes, a Huatai Futures note said.

The most-actively traded stainless steel contract on the Shanghai Futures Exchange, for February delivery, jumped as much as 5.3% to 17,920 yuan ($2,812.39) per tonne. They closed up 4.4% at 17,760 yuan a tonne.

Other steel prices on the Shanghai bourse also gained. Construction used steel rebar, for May delivery, rose 2% to 4,589 yuan a tonne.

Hot rolled coils futures, used for cars and home appliances, increased 1.6% to 4,719 yuan a tonne at close.

The China Iron and Steel Association said on Monday China’s 2021 crude steel output was expected to fall to 1.03 billion tonnes from a record of 1.065 billion tonnes, reaching a “supply and demand balance”.

Benchmark iron ore futures on the Dalian Commodity Exchange ended up 2.8% to 724 yuan per tonne. Spot 62% iron ore for delivery to China, however, slipped $1 to $127.5 a tonne on Monday, according to SteelHome consultancy.

“There’s still room for profits at long-process steel producers to gain, and expectation on resuming steel production and restocking demand before holidays could shore up iron ore prices,” according to Huatai Futures.

Dalian coking coal futures inched 0.4% higher to 2,295 yuan a tonne while coke prices dipped 0.2% to 3,171 yuan per tonne.