Chinese steel futures rose for a third straight session on Wednesday, supported by leaner supply and expectations that consumption in the world’s top user would recover when production cuts are lifted after winter.
Prices of steelmaking raw materials iron ore and coking coal also advanced, with coking coal hitting a two-month peak.
The most-active rebar contract for May delivery on the Shanghai Futures Exchange was up 1.7 percent at 3,796 yuan ($573) a ton by the midday break, after earlier touching a one-week high of 3,821 yuan.
Steel mills across northern China have been ordered to curb output from November through March, corresponding to the Northern Hemisphere winter, as part of Beijing’s campaign to fight smog.
Stocks of rebar among Chinese traders had fallen to 3.61 million tonnes as of Nov. 17, the lowest level in a year, according to data compiled by SteelHome consultancy.
The most actively traded May iron ore contract on the Dalian Commodity Exchange climbed 0.7 percent to 488 yuan per ton by the break after earlier touching a two-week high of 498.50 yuan.
Fellow steelmaking commodity coking coal rose as high as 1,281.50 yuan a ton, its strongest level since Sept. 21, and was last up 3.9 percent at 1,264.50 yuan.
“I think there is some disruption that is causing some problems for the supply from Australia,” said Beijing-based CRU consultant Wang Di said.
Australia is the biggest supplier of coking coal to China. China’s overall coal imports dropped 21 percent in October from the previous month amid efforts by Beijing to replace coal with cleaner fuel in the northern part of the country to meet tough air quality targets.
But Di said she expects iron ore prices to remain under pressure with global supply expected to rise next year.
“There will be more shipments delivered to China in the coming months and inventory at ports are set to rise further,” Argonaut Securities analyst Helen Lau said in a note.
“As China steel mills have yet to restock anytime soon, therefore the iron ore price outlook remains grim in our view.”
Iron ore for delivery to China’s Qingdao port slipped 1.5 percent to $62.50 a ton on Tuesday, according to Metal Bulletin.
Iron ore stockpiles at Chinese ports was at 138.5 million tonnes as of Nov. 17, SteelHome reported. That is 25 percent higher than a year ago.