Steel futures in China retreated on Monday after two days of gains ahead of the scheduled lifting of intensified production restrictions in the nation’s top steelmaking city of Tangshan.
Prices of iron ore, a steelmaking ingredient, extended gains for a third consecutive session.
Stepped-up anti-pollution measures in Tangshan, which require steel mills to curb their sintering operations by 20% up to 70% starting July 21, are in place only until July 31.
The most-active construction steel rebar contract on the Shanghai Futures Exchange, with October expiry, slipped as much as 1.4% to 3,896 yuan ($566.20) a tonne. It was down 1.1% at 3,905 yuan, as of 0214 GMT.
Hot-rolled steel, used in cars and home appliances, fell 1.3% to 3,816 yuan a tonne.
Steel production in China looks set to remain brisk as authorities have ruled out setting blanket output restrictions on heavy industry for the coming winter, including steel mills, despite the government’s campaign to curb pollution.
Any production limits for steel mills during winter will be set by local governments depending on their emissions, the environment ministry said on Friday.
“Markets perceive provincial restrictions to be looser than federal ones, although that does not usually play out since we have seen provincial authorities as being equally as strict,” said Edward Meir, independent commodity consultant at brokerage INTL FCStone in London.
China’s decision comes in the wake of complaints by some local governments and manufacturers that production cuts have hampered industrial operations and dragged on local economic growth.
Small Chinese steel mills, meanwhile, are taking advantage of lax environmental enforcement to ramp up production ahead of bigger rivals, jeopardising anti-smog targets and defying industry consolidation.
Source: Reuters