MANILA: Chinese steel prices recovered from early losses to trade firmly on Friday as Beijing’s efforts to cut production capacity as part of its pollution fight have countered concerns over US tariffs on $34 billion of Chinese goods that have just begun.

The US tariffs took effect as a deadline passed on Friday, and China has reportedly responded in kind, bringing the world’s two biggest economies even closer towards an all-out trade conflict.

The price of construction steel product rebar on the Shanghai Futures Exchange was up 0.2 percent at 3,782 yuan ($569) a tonne by 0623 GMT, after falling as much as 1.1 percent in morning deals.

Hot rolled coil, used in manufacturing, was flat at 3,857 yuan, having dropped by up to 1.5 percent earlier.

Chinese stocks have also risen and other commodities including copper have cut losses.

For steel futures, China’s sustained measures to reduce capacity have lent support to prices, said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

“If a lot of steel capacity will be constrained in order to meet these air quality targets, then domestic steel supply will become tight,” said Lau.

China said this week it will shut more outdated steel and coke capacity in the next three years as part of its battle against pollution. Separately, China’s top steelmaking city of Tangshan ordered steel companies and coke producers to meet ultra-low emissions targets.

A drop in weekly steel inventory in China suggested demand remained firm in the world’s largest consumer and producer. Total steel stocks dropped 154,600 tonnes to 10.098 million tonnes this week, data compiled by Mysteel consultancy showed.—Reuters