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China's warm start to winter heats up Chinese steel, mill profits

From Reuters - December 6, 2017

SHANGHAI (Reuters) - A warm start to the winter has boosted steel prices and margins for mills in China, the worlds top producer, as the higher temperatures have allowed projects to proceed that would normally have come to a halt.

The delay in the seasonal drop-off in demand from the construction sector has prolonged a year-long rally in steel prices and pushed profits to their highest since at least 2008.

The steady demand has exacerbated a supply shortfall caused by mills in 28 Chinese cities cutting their blast furnace output by as much as 50 percent to meet air pollution targets enacted by the government to combat the smog that covers northern China during the winter.

Physical spot prices for steel rebar for immediate delivery rose to 5,210 yuan ($787.72) a tonne on Tuesday, its highest since August 2008, according to steel trading platform Xiben New Line E-Commerce in Shanghai.

Steel mills that produce rebar for construction use are making profits of as much as 2,000 yuan ($302.39) a tonne, though some mill are making about 1,500 yuan, said three analysts that follow the market.

The higher margins are the most since at least 2008, according to Xiben steel, iron ore and coking coal data compiled by Reuters back to that year.

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