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Shanghai rebar hits highest in over 3 years on supply concerns
Reuters Reuters
Wednesday July 12, 2017 1:11 AM
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* Closure of low-grade steel capacity hits supply
* New waste discharge rules for steel expected soon
* Iron ore futures rise for fourth session
BEIJING, July 12 (Reuters) - China's rebar futures rose for a third day on Wednesday, hitting their highest in more than three years amid persistent worries about tight supply in the world's top steel producer.
China eliminated about 120 million tonnes of low-end steel capacity in the first half of the year to tackle a supply glut and pollution. It also plans to send out inspectors to check on steel quality at mills . The country plans to publish new rules targeting air and water pollution from the steel industry in late July, with around 5,000 steel mills across nation having to apply for new waste discharge licences by 2018. "The capacity gap left by low-grade steel remains. Coming quality inspections and environmental licences may further limit capacity ... at steel mills," said a Shanghai-based trader.
The most-active rebar on the Shanghai Futures Exchange rose as far as 3,615 yuan ($532.54) a tonne, its highest since Dec.30,2013. It was up 2.2 percent to 3,598 yuan a tonne by midday.
Total open interest in rebar futures rose by 111,000 lots to 5.73 million contracts, the highest since the contract launched in 2009, equivalent to 57.3 million tonnes.
Rebar inventories held by Chinese traders had increased by 790,000 tonnes to 3.74 million tonnes by Friday, just above a six-month low hit in early June, data from SteelHome consultants showed.
Spot rebar prices rose 0.9 percent to 3,845.7 yuan a tonne on Tuesday, according to data on Mysteel's website.
Rebar margins stood at 1,086 yuan a tonnes for the week ending July 7, according to Mysteel data. That is up from 845 yuan for the week of June 9.
"High margins on rebar helps support price rallies in other materials, which then pushes steel prices even higher," said a Zhengzhou-based trader.
The most-traded iron ore futures on the Dalian Commodity Exchange gained 0.92 percent to 492.5 yuan a tonne on Wednesday.
Stockpiles of imported iron ore at ports had dropped to 139.3 million tonnes as of Monday, just below the record level of 141.5 million tonnes on June 23.
Coking coal futures rose 0.52 percent to 1,159 yuan a tonne. Coke contracts climbed 0.32 percent to 1,863 yuan a tonne by midday on Wednesday.
($1 = 6.7882 Chinese yuan renminbi)
(Reporting by Muyu Xu and Beijing Newsroom; Editing by Joseph Radford)