STEEL futures in China surged to their highest in 32 months yesterday as the government’s resolve to tackle a glut helped tighten supply, lifting raw material iron ore to its strongest in almost three years.

    The two commodities resumed their rally after Friday’s pullback that followed a six-day run-up, also bolstered by signs of recovery in the world’s No. 2 economy.

    The most active rebar on the Shanghai Futures Exchange climbed as much as 7 percent to hit its upside limit of 3,557 yuan (US$514) a ton, its loftiest since April 2014. It closed up 3.6 percent at 3,444 yuan.

    Iron ore on the Dalian Commodity Exchange closed 3.4 percent higher at 635.50 yuan per ton after earlier peaking at 657 yuan, a level last seen in January 2014.

    Steel supply is tightening as the government continues to restrict production by heavy industries, including steel and cement, in its fight against pollution, traders said.

    “Many steel mills have lifted their offer price over the weekend amid limited supply,” said a trader in Shanghai.

    While seasonal steel demand is lean during winter, some traders are restocking on expectations that the market will remain strong going forward, he said.

    Stockpiles of rebar among Chinese traders rose for a third straight week to 3.79 million tons Friday, according to data tracked by SteelHome consultancy.

    Signs of a big revival in China’s economy also continued to boost sentiment toward commodities.

    China’s producer prices rose at the fastest pace in more than five years in November, boosting industrial profits and giving firms more cash flow to pay off mountains of debt, data showed Friday.

    “Metals producers who are focused on smelting such as copper and aluminum and steel production will see their profit growing on the back of enlarged revenue bases,” Argonaut Securities said on the impact of the surge in producer prices. (SD-Agencies)

    Caption:

    A man shovels iron ore into a steel ladle at Wuhan Iron and Steel Group in Wuhan, Hubei Province, in this file photo. Steel futures in China surged to their highest in 32 months yesterday as the government’s resolve to tackle a glut helped tighten supply, lifting raw material iron ore to its strongest in almost three years.

    SD-Agencies