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China steel, iron ore extend gains on more production curbs, restocking

Published 07/06/2016, 01:58 pm
Updated 07/06/2016, 02:00 pm
© Reuters.  China steel, iron ore extend gains on more production curbs, restocking

* More production curbs in Tangshan to improve air quality

* Some mills replenishing iron ore stocks ahead of break - trader

By Manolo Serapio Jr

MANILA, June 7 (Reuters) - Shanghai steel futures extended gains to hit a three-week high on Tuesday amid more short-term production curbs in a key Chinese city while iron ore prices rallied further as mills built stocks ahead of holidays later this week.

China's top steel-making city of Tangshan has ordered mills in and near the area to cut production from June 14-21 to ease air pollution, similar to an order it made in May. latest order supports hopes of tighter steel supply at a time of slack seasonal demand, said Richard Lu, analyst at CRU consultancy in Beijing. But he said the boost to prices should be fleeting.

"We still hold our view that there are no sustainable factors to support very high prices," said Lu.

Construction activity in China, the world's top steel consumer, typically slows down from June through August due to the scorching summer.

Rebar, or reinforcing steel used in construction, rose as far as 2,103 yuan ($320) a tonne on the Shanghai Futures Exchange SRBcv1 , its strongest since May 18 before paring gains to 2,078 yuan by midday, up 2.3 percent.

Iron ore on the Dalian Commodity Exchange DCIOcv1 was up 3.4 percent at 369 yuan a tonne, after peaking at 374.50 yuan earlier, its loftiest since May 23.

The gains add to rebar's four-percent spike and iron ore's 5.6-percent surge on Monday, helped by a broad-based rally in commodities, spurred by a weaker dollar, that spread to China. Chinese steel producers are replenishing stockpiles of iron ore ahead of public holidays in China on Thursday and Friday.

"Some mills are grabbing raw material before the holiday, most we saw are sourcing some port stock cargoes to meet short-term demand," said a Shanghai-based iron ore trader.

Stocks of imported iron ore at China's major ports stood at 100.25 million tonnes on June 3, down 400,000 tonnes from the prior week when it reached the most since December 2014, according to data tracked by industry consultancy SteelHome. SH-TOT-IRONINV

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI climbed 2.2 percent to $50.60 a tonne on Monday, according to The Steel Index.

($1 = 6.5714 Chinese yuan)

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