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(Bloomberg) -- Steel futures in China reached new highs as investors weighed the nation’s commitment to lowering production against its strong demand.
Rebar in Shanghai climbed to the highest level since futures began trading in 2009, while hot-rolled coil closed at a more than seven-year high. Both advanced over 3% this week as Mysteel Global reported Handan city in Hebei province planned to curb output, while some mills in the Fengrun area of Tangshan halted production from Thursday.
Chinese authorities and the steel sector have pledged to lower output from last year’s record, with Tangshan already facing a slew of restrictions amid the push to control emissions. Despite these efforts, crude steel production neared a record in March, while rebar inventories declined for a sixth consecutive week, signaling strength in demand amid the construction season.
In the iron ore market, some supply risks emerged in Brazil as an environmental authority ordered Vale SA to halt operations at its Ilha da Guaiba export terminal in Rio de Janeiro state over permitting breaches, but hours later, another agency gave the green light to continue. Earlier, this week the iron ore giant reported less-than-expected production in the first quarter.
“Vale kept its annual guidance of 315-335Mt, although it is tracking toward the lower end of it,” according to Sharon Mustri, an analyst at BloombergNEF. “This means prices may continue to rally and the seaborne market could fail to meet strong Chinese demand.”
Iron ore futures in Singapore were on course for a fourth weekly gain, with prices rising 1.2% to $181.10 a ton by 3:04 p.m. local time Friday. Contracts in Dalian closed 1.2% higher.
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