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China steel futures rise for third day on tight supply worries
Reuters Reuters
Wednesday July 26, 2017 1:17 AM
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* China inspecting low-quality steel plants
* Iron ore traders expect higher prices
* Coke, coking coal track steel's rise
BEIJING, July 26 (Reuters) - China's steel rebar futures climbed for a third session on Wednesday, rising as much as 2.8 percent, reflecting concerns about a possible tightening of supply as Beijing sends inspections teams to mills across the nation.
The government is sending 18 inspection teams to inspect low-end steel plants, to prevent them from reopening after the end-June deadline of a crackdown on low-tech steel furnaces, according to report by Xinhua News.
China in the first half of the year closed around 120 million tonnes of low-grade annual steel capacity, mostly making products for the construction industry. The world's largest steel producer has been clamping down on production of low-grade rebar in a bid to cut excess supply and help tackle pollution.
"Steel supply is limited by inspections, while new capacity has not been released, which provides momentum for the price rally," said Xu Bo, analyst at Haitong Futures.
Analysts estimate China's total steelmaking capacity at about 1.2 billion tonnes, with an annual surplus of as much as 400 million tonnes.
Beijing plans to publish new rules targeting pollution from the steel industry in late July, which could result in the closure of even more steel plants. The most-active steel futures on the Shanghai Futures Exchange rose 1.9 percent to 3,608 yuan ($534.20) a tonne by midday, after touching 3,639 in the morning session.
Spot rebar prices gained 0.25 percent to 3,928.21 yuan a tonne on Tuesday, according to Mysteel.
The rebounding steel prices enhanced appetites for steelmaking raw material iron ore.
The most-traded iron ore futures on the Dalian Commodity Exchange rose 1.1 percent to 526.5 yuan a tonne.
"Traders are reluctant to sell iron ore at this moment as they are expecting a higher price, leading to tight supplies," said analysts at CITIC Futures in a note written in Mandarin.
September coking coal prices gained nearly 2 percent on Wednesday to 1,276.5 yuan a tonne. The most-active coke futures climbed 1.7 percent to 1,949 yuan a tonne.
($1 = 6.7540 Chinese yuan)
(Reporting by Muyu Xu and Beijing Newsroom; Editing by Tom Hogue)