China pollution crackdown lifts steel’s metal ingredients

MELBOURNE — Shanghai zinc and nickel surged on Monday on the back of a sustained crackdown in China’s polluting steel industry, which fueled worries about supply of the construction material and lifted prices of its raw materials.

Both metals were jolted out of a downtrend that last week saw them touch their lowest for the year amid concerns about a slowdown in China’s metals demand. The rally in steel prices also caught short-holders by surprise and forced them to cover their positions.

“It’s all very macro-driven at the moment,” said analyst Daniel Morgan at UBS in Sydney.

He said that the metals market, including steel, was overheated in the first quarter given strong growth in top consumer China, but the country’s recent shift towards credit tightening had pushed the sector to overcorrect.

“When it’s all done and dusted, I think this year will have been a reasonable year for commodities.”

Shanghai Futures Exchange (ShFE) zinc surged 4.70%. London Metal Exchange ( LME) zinc rallied 0.90% to $2,655 a ton, having earlier struck its highest in two weeks at $2,667 a ton, the most expensive since May 2. ShFE nickel jumped 2.60%, while LME nickel was off earlier highs, but still up 0.30%.

China’s Tangshan city launched a campaign to improve air quality last week, saying steel mills in the country’s top producing region that fail to meet emission standards face suspension and heavy fines.

China issued a draft of new rules for property sales and leasing on Friday to improve management and operation in a part of the services sector that is often poorly regulated.

LME copper had edged down 0.20% to $5,669.50 a ton by 0140 GMT, having hit the highest since early May at $5,694.50 a ton on Friday. The ShFE copper contract was up 1.50% at 45,820 yuan ($6,649) a ton.

China’s economy will likely expand around 6.80% in the second quarter of 2017, the State Information Center said in an article published in the state-owned China Securities Journal on Saturday.

An estimated 9,000 workers at the giant Grasberg copper mine operated by the Indonesian unit of Freeport McMoRan, Inc. will extend a strike for a second month, a union official said on Saturday, in an ongoing dispute over employment terms and layoffs.