Tangshan on orange pollution alert as steel production curbed

SHFE Rebar futures extended gains to the highest level in almost three months as increasing pollution in key producing areas curbs output at steel mills.

Tangshan, China’s top steelmaking hub in Hebei province, will activate an orange alert, the second-highest warning in China’s four-tier system to combat heavy smog expected from Wednesday, Shanghai Metals Market said in a report.

Production at local steelmakers will be restricted following the start of the anti-smog response and it remains unclear when the alert will be lifted. The air quality in the Beijing-Tianjin-Hebei region continues to deteriorate, prompting environmental measures in some areas, Huatai Futures says in a note, there will be an impact on steel output on these regions.

With the positive sentiment in steel and margins it appears that the environmental cuts are having no effect on Iron Ore, rather other regions in China would take advantage of the situation and keep on producing, with WoW rebar production has been increased.

On SGX Dec trading up to $85 bucks, Jan $83.15 up the best part of a dollar from last night’s closing curve, spreads also widening as we push Dec/Jan trading 1.85 and 1.90.

SGX remains well supported compared to onshore futures. DCE closed the session 7am London time at 632.5, 1 RMB lower than the night session last night, but SGX Dec went 60 cents higher from last night 84.20 to this morning 84.80. Dec/Apr trading 6.55, Q2/Q4 5.00.