[Ferro-Alloys.com] Chinese iron ore futures soared by their 9 percent trade limit on Wednesday as steel prices extended gains amid planned mill closures in the country’s top producing city as part of efforts to fight pollution.

Tangshan in China’s northern Hebei province has ordered many of its industrial factories, including steel mills, to curb production or even close for as long as four months through to March in a bid to clear the skies of smog.

“Further closures of steel capacity in the Hebei province in China due to pollution issues has seen steel prices rebound over the past few days, dragging iron ore prices higher,” ANZ Bank said in a note.

The most-traded iron ore for January delivery on the Dalian Commodity Exchange rallied as much as 9 percent to hit the exchange-set ceiling of 616.50 yuan ($89) a tonne. It was up 8.2 percent at 612.50 yuan by 0213 GMT.

Dalian iron ore surged by its 6-percent limit on Tuesday as it recovered with steel and other steelmaking raw materials after investors returned to the market to pick up sold-off commodities.

Some traders say Wednesday’s gains may be part of sustained speculative trading, noting that the Tangshan curbs may tighten available steel supply but should also cut demand for iron ore.

“Logically if steel capacity is under control or restricted it should not give any positive support to iron ore,” said a Shanghai-based trader.

The most-active January rebar on the Shanghai Futures Exchange was up 3.6 percent at 2,927 yuan a tonne, after rising as far as 2,966 yuan. The construction steel product rose by its 6-percent limit on Tuesday.

Stronger futures lifted spot iron ore sharply again on Tuesday as physical trades picked up with Australian cargoes sold at higher prices, according to The Steel Index which tracks Chinese transactions. Prices of iron ore stocked at China’s ports rose about 15 yuan per tonne, it said.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB jumped 6.5 percent to $74.90 a tonne, data from Metal Bulletin showed. The spot benchmark lost 8.8 percent last week, snapping a five-week rally.

**Article from Internet for reference only

• [Editor:tianyawei]