Chinese steel futures retreated on Wednesday with investors concerned that curbs on iron ore production capacity in the top steelmaking city of Tangshan could yet fall short of their expectations.
Tangshan, in northern China’s Hebei province, plans to temporarily ban production from a total of 18.21 million tonnes of ironmaking capacity from mid-November until mid-March. Ironmaking by blast furnaces is a key procedure for making steel.
Steel supplies in the world’s top producer will be hit by the temporary ban on the capacity use, and the government is expected to step up efforts to curb steel production in more cities to clear its skies in the winter heating season.
However, some analysts are concerned that the capacity ban will be relaxed if smog weakens.
“The capacity curb is slightly lower than market expectation. And what really matters is if the production cut can be implemented thoroughly, which will depend on the weather, so the outlook remains uncertain,” said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.
The most active rebar on the Shanghai Futures Exchange closed down 0.95 percent at 3,563 yuan a tonne.
Dalian iron ore futures inched up 0.8 percent to 429.5 yuan a tonne.
Among other steelmaking raw materials, Dalian coal future dropped 0.3 percent to 1,079 yuan a tonne and coke futures jumped 0.8 percent to 1,688.5 yuan a tonne.
Iron ore for delivery to China’s Qingdao port dropped 0.4 percent to $58.52 a tonne on Tuesday, according to Metal Bulletin.