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Shanghai Rebar hits 6-year High Overproduction Curbs, Power Shortages

23 Aug 2018

The most-active rebar contract for October delivery on the Shanghai Futures Exchange hit 4,266 yuan ($622.11) a tonne, its highest since April 2012. As of 0218 GMT, the contract was up 1.7 per cent at 4,244 yuan a tone.
China's construction steel rebar prices hit their highest in more than six years amid concerns over tight supplies on electricity rationing and as China plans to impose industrial production curbs during winter.
The most-active rebar contract for October delivery on the Shanghai Futures Exchange hit 4,266 yuan ($622.11) a tonne, its highest since April 2012. As of 0218 GMT, the contract was up 1.7 per cent at 4,244 yuan a tonne.
Some steel mills in Hebei, top steelmaking province in China, have been ordered to curb operations due to power shortages in the region.
According to some industrial sources, around 30 per cent of output capacity has been affected by the electricity rationing, which asked mills to work only during off-peak hours at night.
Meanwhile, environmental pressure has been increased across the country after Beijing issued the three-year anti-pollution action plan and draft rule to clear smog in the 28 northern cities in the coming winter.
Sweeping measures are expected across heavy industries including steel, coke, non-ferrous and construction materials aimed at reducing emissions during the winter when temperatures plummet and homes crank up the heat, drawing on the nation's coal-fired power plants.
The southern region of Guangxi aimed to cut the average concentration of hazardous floating particles, known as PM2.5, by 15 per cent by 2020 from the level recorded in 2015, according to state-owned Xinhua News.
Guangxi will reduce more capacity in steel, non-ferrous smelting and alcohol sectors and lift threshold of capacity swap in those industries.
"Higher environmental standards have strengthened market expectations of stricter rules of production curbs ... We expect the steel market to maintain a positive trend in a short term," said analysts from Huatai Futures.
Spot rebar prices edged 0.2 per cent higher to 4,451.33 yuan a tonne on Monday, data from Mysteel consultancy showed.
Steelmaking ingredient iron ore on the Dalian Commodity Exchange rose for a third session. It climbed 0.5 per cent to 502 yuan a tonne on Tuesday after surging nearly 7 per cent in the previous session.
Market also expects more stringent inspections on mines across the country, which might lead to tight supplies, after four workers were killed in an explosion incident at a small coal mine in southern China last night.
Coking coal prices were little changed at 1,222.5 yuan a tonne. Coke rose as much as 3.4 per cent, its highest since August 2011. 

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