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China steel extends gains as mills cut output ahead of winter
Reuters Reuters
Thursday October 12, 2017 10:48 PM
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* China Sept iron ore imports hit record 103 mln tonnes
* Iron ore, coking coal futures rise, tracking steel's gains
By Manolo Serapio Jr
MANILA, Oct 13 (Reuters) - Shanghai steel futures rose for a second straight day on Friday, supported by efforts among Chinese cities to curb output well ahead of winter.
China's top steelmaking city of Tangshan became the latest to enforce production cuts this month, ahead of the previous deadline of Nov. 15, when winter heating systems in China are switched on. Tangshan ordered its steel mills to halve sintering output by 50 percent from Thursday. Sintering processes raw material iron ore into a product prior to steelmaking and is a major cause of pollution. The most-active rebar on the Shanghai Futures Exchange was up 3.2 percent at 3,694 yuan ($562) a tonne by 0237 GMT, adding to Thursday's 2.8 percent spike.
The steel production cuts mostly cover China's northern cities and mills in other areas "are going to have to increase utilisation and output to meet overall demand in the country,' said ANZ commodity strategist Daniel Hynes.
"There's probably going to be a lull in pricing before we do see that stronger demand come from the west and the north of the country push steel prices up again," he said.
As steel prices rose, so did raw materials iron ore and coking coal futures. The most-traded iron ore contract on the Dalian Commodity Exchange was up 2.4 percent at 444 yuan per tonne, after hitting a 3-1/2-month trough of 425.50 yuan on Thursday.
China's iron ore imports rose 11 percent in September from a year earlier to a record 103 million tonnes, according to Reuters calculations based on customs data. The import surge suggests strong Chinese demand for high-quality iron ore particularly from top suppliers Australia and Brazil, said Hynes.
"I think import demand will remain very strong but there are certainly some headwinds for this type of growth to continue, in part because we're expecting to see a slowdown in export growth out of Australia and (Brazil's) Vale has indicated that Q4 volumes will be lower."
Coking coal futures climbed 4.2 percent to 1,160 yuan a tonne and coke rose 2.2 percent to 1,838 yuan.
Iron ore for delivery to China's Qingdao port rose 0.7 percent to $60.09 a tonne on Thursday, according to Metal Bulletin, recovering from Wednesday's 3-1/2-month low.
($1 = 6.5771 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Vyas Mohan)