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Steel and iron ore futures rally as China steps up capacity cuts

Steel News - Published on Wed, 11 Jan 2017

Image Source: Reuters
Reuters reported that Shanghai steel futures jumped 7% to their highest in nearly three weeks on Tuesday, supported by promises from China's top steelmaking province to further reduce production capacity. The most-active rebar on the Shanghai Futures Exchange closed up 7 percent at the exchange-set ceiling of 3,167 yuan ($457)a tonne, its highest since Dec. 22. Raw material iron ore followed steel's rally, soaring 8% to its strongest in more than three weeks, with coking coal climbing nearly 8%.

Rhe official Xinhua news agency reported on Sunday that Hebei, which accounts for about a quarter of China's total steel output, plans to slash 31.86 million tonnes of steel and ironmaking capacity this year. That would be more than double the 14.62 million tonnes of steel capacity that Hebei cut last year.

Commonwealth Bank of Australia analyst Vivek Dhar said in a note that "While smog concerns still threaten to lower steel output, a drive to cut outdated steel capacity is also pressuring production lower.”

A better outlook for the Chinese economy also bodes well for steel prices, said Helen Lau, analyst at Argonaut Securities. Ms Lau further said that "Overall, the stable downstream demand and reduced supply boost positive sentiment towards steel markets.”

China's economic growth last year was expected to be around 6.7%, said Xu Shaoshi, director of the National Development and Reform Commission. Beijing had targeted growth of 6.5 to 7.0%. Mr Xu also said China's steel and coal sectors will face increasing pressure this year to cut capacity as the government ramps up efforts to tackle polluting heavy industries and address a glut.

Source :

Posted By : Rabi Wangkhem on Wed, 11 Jan 2017
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