Shanghai rebar hits 7-year high on fears of tight supply

China’s construction steel rebar rose to a near seven-year high on Monday, driven by concerns over tight supplies due to a possible extension in winter production curbs in the northern part of the country.

On Friday afternoon, the buzz in the market was that Tangshan, the top steelmaking city in North China’s Hebei Province, is considering advancing its production cut plan to September 1, adding two more months to its scheduled restriction period starting mid-November.

Steel mills in Tangshan have been asked to shut 50 percent of production capacity during the summer season starting from July 20.

However, an official at Tangshan’s Iron and Steel Association and at least two steel mills in Tangshan told Reuters they had not received any notice to that effect from the government.

The smog-blanked city was identified as one of the most polluted cities among 169 regions monitored by the environment ministry in July.

“Some mills are carrying out even bigger rates of capacity cutting than the level the government requested. We expect the production restrictions will not be lifted even after summer ends,” said a Tangshan-based steel trader.

Benchmark Shanghai rebar prices surged as much as 3.3 percent to 4,363 yuan ($634.71) a ton, their highest since September 22, 2011.

The most-active hot-rolled coil on the Shanghai Futures Exchange gained 3.4 percent to 4,264 yuan a ton during early trade on Monday.

Weekly stockpiles of steel products in China had added 74,600 tons to 10.07 million tons as of Friday, data from consultancy Mysteel showed, with rebar stocks increasing 0.1 percent and hot-rolled coil stocks rising 0.8 percent.

Utilization rates at steel mills across the country last week stayed at the same level as the prior week at 66.16 percent, according to data from Mysteel.