China's iron ore and steel futures climbed on Wednesday after some cities in the north of the country announced an early start to winter restrictions on mill output, though coke and coking coal both continued to fall on worries over faltering demand.
The most-traded construction steel futures contract on the Shanghai Futures Exchange closed up 1.74% at 3,679 yuan ($554.27) per tonne, for its biggest one-day gain since Sept. 4.
Market open interest dived 100 000 lots, equivalent to one-million tonnes and worth 3.6-billion yuan, on Tuesday, and hit its lowest since Sept. 11, suggesting prices may have bottomed out for now as investors raced to cover bearish bets and ending a prolonged bout of selling.
Iron ore for January delivery on the Dalian Commodity Exchange finished up 1.07% from the previous session at 473 yuan per tonne, snapping a four-day losing streak.
"We are seeing a lot of buying interest over the past couple of days," said Kelly Teoh, an iron-ore broker with Clarksons Platou Securities in Singapore.
Much of that business might take place at a major industry conference in Qingdao this week, while many investors are also closing out positions ahead of the quarter-end and the week-long Chinese holiday from Oct. 1.
The city of Handan, in China's northern Hebei province, has ordered a 50% cut in production from local blast furnaces from Oct. 1, according to consultancy Mysteel, which is some six weeks before the official winter heating season starts on Nov. 15.
Also in Hebei, the key steelmaking hub of Tangshan earlier this week announced temporary restrictions on pelletizing and sintering production to tackle poor air quality. These restrictions have now been lifted, according to media reports.
Early anti-smog action in Hebei has led to a fall in the price of steelmaking raw materials, said Zhao Xiaobo, an analyst at Sinosteel Futures in Beijing.
The market expects demand for these materials to fall during the heating season, when as much as 50% of steel production in cities such as Tangshan is shut down, Zhao said, adding that cuts are more likely to be implemented early in places experiencing bad weather like Hebei.
Coking coal and coke markets tumbled about 20% over the past month, with investors placing bearish bets amid concerns about falling demand over the Chinese winter.
Dalian's most-active coke futures contract, for delivery in January, was down 1.9% at 1,984 yuan, its lowest close since July 28. Last week, the market notched up its biggest weekly loss since May.
The most-active coking coal futures contract finished down 0.38% at 1,173.50 yuan for its lowest close since July 14.