August 3, 2018 / 2:55 AM / 3 months ago

Shanghai steel resumes rise, coke rallies as China eyes winter curbs

MANILA (Reuters) - Shanghai rebar steel futures climbed almost 2 percent on Friday to near a 5-1/2-year high amid China’s plans to impose industrial production curbs during winter for the second year in a row.

Coke prices jumped more than 5 percent on the planned restrictions, hitting their strongest level since mid-September and marking the best week since January last year. Iron ore and coking coal also rose.

In the latest plan to be implemented from Oct. 1 to March 31, 2019, steel mills in six key cities - Tianjin, Shijiazhuang, Tangshan, Handan, Xingtai and Anyang - will be asked to cut 50 percent of their capacity during the heating season.

Those in the rest of the smog-prone Beijing-Tianjin-Hebei region will need to shut no less than 30 percent, according to a draft proposal.

The steps would be largely similar to those imposed last winter, which was operational between Nov. 15, 2017 and March 15, 2018, that forced steel mills, coke producers, smelters and other industrial plants to cut output to limit pollution.

The most active October rebar on the Shanghai Futures Exchange closed up 1.6 percent at 4,187 yuan ($609) a tonne, after peaking intraday at 4,199 yuan, near Wednesday’s 5-1/2-year high of 4,243 yuan.

The construction steel product gained almost 3 percent this week, the most in three weeks.

“Assuming key focus areas cut 50 percent of capacity while the rest of the areas ... cut 30 percent, we estimate the steel production impact at 78 million tonnes during the winter period,” Morgan Stanley analysts said in a note.

That volume corresponds to 9 percent of China’s crude steel output in 2017.

Prices of coke, the processed form of coking coal, also jumped. The most-traded September coke on the Dalian Commodity Exchange climbed as far as 2,429.50 yuan a tonne, the highest since Sept. 14.

The contract ended 5.5 percent higher at 2,428 yuan, gaining 9.5 percent for the week, its biggest such increase since January 2017.

Iron ore futures rose 2.3 percent to 484.50 yuan per tonne and coking coal climbed 1.6 percent to 1,202.50 yuan.

Spot iron ore for delivery to China’s Qingdao port gained 0.5 percent to $66.87 a tonne on Thursday, according to Metal Bulletin.

Reporting by Manolo Serapio Jr., Editing by Sherry Jacob-Phillips and Subhranshu Sahu

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