Chinese coking coal futures rose their most in a month on September 6, buoyed by firm physical prices as environmental inspections in major coal mining hubs of Shanxi and Shaanxi province increased concerns about falling output.
The coking coal contract for January delivery on the Dalian Commodity Exchange jumped as much as 4% to 1,286.5 yuan/t ($188.30/t), before closing at 1,283.5 yuan/t, still up 3.7%.
Dalian's most-active iron ore contract closed up 3.3% at 502.5 yuan/t, its highest since August 21. Prices for the steel raw material remained strong even after China's top steelmaking city extended output curbs on heavy industry for another month.
The city of Tangshan said on September 5 it will continue to carry out anti-pollution measures in September by ordering steel mills, coke producers and power generators to shut part of their production.
The city had earlier imposed a six-week drive between July 20 and August 31 to almost halve the production capacity on some sintering machines and blast furnaces.
"The rally on iron ore prices is supported by higher steel prices. The market is expected to see even fatter profit margins at mills amid stepped-up environmental measures. Therefore, steel mills would be willing to pay more for raw materials," said a Shanghai-based iron ore trader.
The average profit margins at Chinese steel mills have been hovering at about 1,000 yuan/t over the past four months, according to Huatai Futures.
Stockpiles of the imported steelmaking ingredient iron ore at Chinese ports dropped to 149.2 million tonnes last week, the lowest level in eight months, data showed.
"With falling inventory, traders are not in rush to sell iron ore at this moment," said the Shanghai-based trader.
Coke prices rose 0.81% to close at 2,412 yuan/t.
Benchmark Shanghai rebar futures climbed 1.5% to 4,148 yuan/t.
(Writing by Tammy Yang Editing by Jessie Jia)
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