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UPDATE 1-China steel rallies to 5-week high on Tangshan output curbs

Published 13/06/2016, 05:21 pm
© Reuters.  UPDATE 1-China steel rallies to 5-week high on Tangshan output curbs

* Tangshan city orders mills to cut output June 14-21

* May limit demand for raw material iron ore

* China steel output near record high in May

* Baosteel cuts prices for July delivery (Adds Baosteel price cut, updates futures prices and adds coal)

By Manolo Serapio Jr

MANILA, June 13 (Reuters) - Chinese steel futures climbed more than 5 percent to the highest in five weeks on Monday amid production curbs in the top steelmaking city of Tangshan that could limit supply in the short term.

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, according to traders. most-traded rebar, or reinforcing steel used in construction, on the Shanghai Futures Exchange SRBcv1 rose as far as 2,189 yuan ($333) a tonne, its strongest since May 9. It closed at 2,170 yuan, up 4.3 percent.

Tangshan is the biggest city in Hebei province, which accounts for more than 20 percent of China's steel output.

The output cuts could limit appetite for raw material iron ore, traders said.

"No one wants to buy iron ore for their production. Steel production is being curbed due to environmental pressure and various meetings in Tangshan area," said an iron ore trader in Singapore.

The events include the Hebei International Trade Fair that runs from June 14-21, a Beijing trader said.

Iron ore futures also rose, but the gains were much smaller than that of Shanghai rebar's. The most-active iron ore on the Dalian Commodity Exchange DCIOcv1 closed up 1.5 percent at 373 yuan a tonne.

The curbs in Tangshan may help limit China's output this month after production rose 1.8 percent from a year ago to 70.5 million tonnes in May, according to government data. That was near the record high of 70.65 million tonnes in March. rally in steel prices earlier this year spurred once-shut Chinese mills to restart operations. But demand failed to keep pace with rising supply, causing Shanghai rebar to fall more than 20 percent last month.

In a sign that steel demand will weaken further, China's biggest listed steelmaker, Baoshan Iron & Steel 600019.SS (Baosteel), said it has cut prices of its main steel products for July delivery. of other steelmaking raw materials fell on Monday, with coking coal DJMcv1 sliding 4.1 percent and coke DCJcv1 down 1.4 percent. Both are traded on the Dalian exchange. ($1 = 6.5845 Chinese yuan)

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