Chinese steel prices ended three days of losses to edge higher on Wednesday, with top steelmaking city Tangshan planning further production cuts this month as it races to meet its air quality target this year.
But prices for steel and raw materials iron ore and coke ended well off the day’s peaks.
Tangshan, which accounts for about 10 percent of China’s total steel output, ordered industrial plants, including steel mills, to reduce output by an average 40 percent from Dec. 13 to 31, traders said, citing a notice published by the local government late on Tuesday.
Reuters was unable to verify the statement and the Tangshan government declined to comment.
The most-active rebar contract on the Shanghai Futures Exchange closed up 0.3 percent at 3,317 yuan ($483) a tonne, after climbing as much as 2.2 percent. Hot rolled coil rose 1.2 percent to settle at 3,316 yuan, off a session high of 3,350 yuan.
“This shows the government is still quite serious in its anti-pollution campaign,” said a Shanghai-based iron ore trader.
“Whenever the pollution situation is getting worse, they will start a new round of production cuts.”
China allowed local governments to implement their own production restrictions this winter, instead of repeating last winter’s blanket limits when Beijing ordered mills to cut output by up to half.
That helped boost Chinese steel output at a time of slower demand as construction projects are halted by the cold weather, hitting steel prices in the past weeks.
The most-traded May iron ore on the Dalian Commodity Exchange gained 0.4 percent to end at 474 yuan per tonne, pulling back from the day’s peak of 483 yuan.
Coke also trimmed gains, closing 0.5 percent higher at 1,965 yuan a tonne, after jumping nearly 3 percent in morning trade. Coking coal eased 0.1 percent to 1,433.50 yuan.
With steel demand likely to remain weak over the next two months of winter and production expected to stabilise, as mills that are not covered by output curbs continue to produce more, “steel prices may consolidate at current levels or decline,” said the Shanghai trader.
Spot iron ore for delivery to China SH-CCN-IRNOR62 slipped 0.7 percent to $66.40 a tonne on Tuesday, according to SteelHome consultancy.