China steel price driven by enforced production cuts

China steel futures edged higher on Friday, trading back near 5year high, amid China’s plans to impose industrial production curbs during winter for the second year in a row.

Coke prices also spiked on the planned restrictions, hitting their strongest level since mid September.

In the latest plan to be implemented from Oct. 1 to March 31, 2019, steel mills in six key cities, Tianjin, Shijiazhuang, Tangshan, Handan, Xingtai and Anyang will be asked to cut 50 % of the capacity during the heating season.

Those in the rest of the smog prone Beijing Tianjin Hebei region will need to shut no less than 30%, according to a draft proposal.

The steps would be largely similar to those imposed last winter, which was operational between Nov. 15, 2017 and March 15, 2018, that forced steel mills, coke producers, smelters and other industrial plants to cut output to combat pollution.

The construction steel product (like erw steel pipe) has risen more than 2% till this week, the most in three weeks.

China steel billet prices were 3,850 yuan ($565) per tonne on Friday, up by 50 yuan per tonne from a week earlier due to tight supply, caused by steel production cuts, enforced to satisfy environmental protection regulations.