Shanghai Steel Futures Fall Amid Easing Production Restrictions

Chinese steel futures fell on Wednesday as production restrictions were lifted in some steel centers, raising fears that overall production will remain robust and provide additional support for record high iron ore prices.

The most active October rebar contract on the Shanghai Futures Exchange fell 1.5% to 4,001 yuan ($ 581.15) a tonne in early trading, adding 1.1% to Tuesday's losses.

From June 19 to July 1, from June 19 to July 1, a nine-session course on construction steel began, supported by rising demand, declining inventories and limited production in heavily polluted industrial centers in China.

China's leading steel city, Tangshan, introduced a new set of production restrictions for its iron and steel producers last month, which will be in effect until August 1.

“The policy announced in Tangshan was not as strict as we heard last month,” said a Shanghai steel merchant. Reuters was unable to immediately confirm this, but an industry website reported late Tuesday that Tangshan had indeed eased production restrictions.

“This means that some businesses do not need to cut that much production this month,” the trader said. “They may be allowed to continue production for a certain amount of time, and this will increase the supply of steel. This is why Shanghai futures are under pressure. ”

Hot rolled steel, steel used in automobiles and home appliances, fell 1.6% to 3,867 yuan a tonne, surging from its all-time high of 4,049 yuan, which also fell on Monday.

Less stringent restrictions on steel production could mean additional demand for raw materials for steel production, including iron ore.