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February 14, 2017

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Capacity cuts boost raw material prices

COMMODITY prices surged in China yesterday, helped by domestic policies that encourage capacity cuts and shrinking global supply of oil and copper.

Iron ore led the surge as its most traded contract for May delivery jumped 6.7 percent to 713 yuan (US$104) per ton yesterday on the Dalian Commodity Exchange, “boosted by the central government’s efforts to cut inefficient and illegal capacity,” said Wang Guoqing, research director at, a steel industry website.

A total of 35 steel companies will be closed “as they failed to meet protocols on environmental protection, quality, safety and energy-saving,” the Ministry of Industry and Information Technology has said.

Additionally, the most traded June delivery contract for road-paving material bitumen jumped 5.9 percent to 2,938 yuan per ton, while copper for April delivery rose 5.36 percent to 50,120 yuan per ton, a two-and-half-year high, on the Shanghai Futures Exchange.

Their prices rose due to falling global supply while “China intends to make more efforts in 2017 to phase out inefficient capacities,” said Zhang Qizuo, director of the Research Center of Strategic Economic Development for G20.

Domestic copper prices rose in line with a worldwide rebound as workers went on strike at BHP Billiton’s Escondida copper mine in Chile.


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