Chinese rebar futures climbed to their highest levels since August 2011 on Wednesday, driven by output cut concerns as the country takes steps towards environmental protection.
The highest level in 10 years
The most actively traded rebar contract for May delivery advanced 5.0% to 4,894 yuan ($757.13) per tonne as of 0330 GMT on the Shanghai Futures Exchange, after surging 5.6% to its 10-year high earlier in the session.
Steel product output to be subdued
According to a note from SinoSteel Futures, the steel products output is expected to remain subdued in short term due to the Chinese industry ministry’s pledge to cut crude steel output to protect the environment. The heavy pollution alerts issued in Hebei province and the impending annual parliament meeting is also expected to impact the output.
As per GF Futures, the decision to shut down seven blast furnaces by March 10 of Top steel making Tangshan city is expected to lower pig iron output by 5,000 tonnes a day.
Prices surge for related materials
In a cascading effect, there was an uptick in the prices of steelmaking raw materials. Hot rolled coil futures, used in cars and home appliances, surged 4.3% to a record high of 5,067 yuan, while benchmark iron ore futures climbed 2.9% to 1,166 yuan a tonne on the Dalian Commodity Exchange rose.
Dalian coking coal reported a 6.0% surge to reach 1,522 yuan per tonne while coke moved up by 2.1% to 2,552 yuan per tonne. Meanwhile, stainless steel futures declined by 1.4% to 14,795 yuan a tonne on the Shanghai exchange.
20 billion yuan to be invested in new projects
Despite the headwinds, new steel projects are also coming in. Steelmakers like Baowu Steel Group and Fujian Sangang Group are reported to have signed agreements to invest 20 billion yuan in steel projects in the southeastern Fujian province.