Futures contracts for steel in China have reached new highs, as investors estimate Beijing's commitment to reducing production against its strong demand. Rebar prices in Shanghai soared to their highest level since the start of futures trading in 2009, while hot-rolled steel coil prices closed at their highest point in over seven years. Both prices increased by more than 3% this week, as "Mysteel Global" reported that the city of Handan in Hebei Province plans to cut production, while some mills in the Fengrun area of Tangshan halted production starting Thursday. According to its website, "Mysteel Global" serves as a platform that provides investors with insights into global metal markets.
**Production Cuts to Reduce Emissions**
Chinese authorities and steel companies are committed to reducing production below the record levels seen in 2020, as Tangshan already faces numerous restrictions amid efforts to control emissions. Despite these efforts, crude steel production approached record levels in March, while rebar inventories have declined for the sixth consecutive week, indicating strong demand during the construction season.
In the iron ore market, some supply risks have emerged in Brazil, as an environmental agency ordered mining company Vale SA to halt operations at its Ilha Guaíba export terminal in Rio de Janeiro due to violations. However, hours later, another agency gave the green light to continue. Earlier this week, Vale, the iron ore giant, reported lower-than-expected production for the first quarter of 2021.
Sharon Mustri, an analyst at BloombergNEF, said, "Vale has kept its annual production target at 315-335 million tons, although it is trending towards reducing capacity." He added, "This means that prices may continue to rise and seaborne imports may fail to meet strong Chinese demand." Iron ore futures in Singapore were set to record gains for the fourth week, with prices rising by 1.2% to $181.10 per ton by 3:04 p.m. (local time) on Friday. In Dalian, northeastern China, iron ore futures also closed up 1.2%.
