Reuters reported that Shanghai steel futures stretched gains, hitting a fresh six-week high on Thursday, as traders bet Beijing's possible moves to cope with pollution in the steel sector could cut capacity.
The most active rebar contract for January delivery on the Shanghai Futures Exchange jumped as high as CNY 3,635 (USD 590) a tonne, the highest since May 22. By the midday break, it had dropped back to CNY 3,619 up 0.8%.
Market talk that Beijing may roll out tougher anti-pollution measures by targeting outdated steel production capacities encouraged investors to bid up prices.
Mr Lu Xiaohua an analyst with Everbright Futures said in a research note said that "If the (anti pollution) measures are implemented, it will have a big impact on steel sector in Hebei as the top steel producing province.'
Mr Lu also expected that steel mills would cut production as many of them are losing money.
A few steel mills that buy semi-finished products to produce rebar in Tangshan, a top steel production city in Hebei, have been ordered to shut down after failing to meet environment protection demand, traders said.
The gains in steel prices also encouraged iron ore traders and drove up iron ore swaps, despite resistance in physical buying from steel mills.