China iron ore futures hit 4-mth high as Beijing ramps up steel capacity cuts

reuters.com Policy,  Price,  Iron Ore,  futures 2018-01-09 13:10:00

China's iron ore futures rose more than 3% on January 9 to their highest in four months as investors reacted to moves by Beijing to tighten up on implementing steel production capacity cutbacks.


On January 8, the world's biggest steel producer ordered mills in environmentally sensitive regions, including its steel hub Hebei, to phase out at least 1.25 tonnes of old capacity before building one tonne of new capacity.


The most-traded iron ore futures on the Dalian Commodity Exchange were 3.1% higher at 0230 GMT on January 3 at 558 yuan/t, after touching a peak of 562.5 yuan/t, the highest level since September 13.


Meanwhile the most-active construction steel rebar futures on the Shanghai Futures Exchange rebounded from three days of losses and rose 1.3% to 3,819 yuan/t ($587.45/t).


"Investors are holding positive expectation on iron ore, as they expect strong restocking demands at steel mills ahead of China's Lunar New Year," said Xu Bo, analyst at Haitong Futures. The Chinese New Year holiday will kick in on February 15.


The de-capacity move on January 8 came only a few days after Beijing vowed to continue to "unswervingly" cut existing steel capacity and "strictly" ban the launch of any new steelmaking facilities in 2018.


"Recent capacity control policies have shored up investors' confidence over excessive steel capacity, helping to lift market prices," said analysts at Orient Futures in a note.


Prices of steel raw materials rose alongside rebar on January 9, bolstered also by strong restocking demand from steel mills ahead of China's new year holiday shutdown.


May deliver coking coal contract rose 1.4% to 1,381 yuan/t, while coke futures climbed nearly 1% to 2,081 yuan/t.


(Writing by Alex Guo  Editing by Harry Huo)
For any questions, please contact us by inqury@fwenergy.com or +86-351-7219322.

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