MANILA - Shanghai rebar steel futures climbed to their highest level in more than three weeks on Monday, buoyed by expectations that China's sustained anti-pollution campaign could further disrupt production.

China's smog-prone Hebei province on Thursday began its environmental inspections of industrial plants, with authorities saying they will focus on large and medium-sized companies.

Hebei's top steelmaking city of Tangshan on the same day ordered its mills to halve output for a week amid forecasts of unfavourable weather.

The most actively traded rebar for January delivery on the Shanghai Futures Exchange closed up 1.6 percent at 4,150 yuan ($599) a tonne, after peaking at 4,166 yuan - its strongest since Sept. 20.

Handan, another city in Hebei, told a recent conference that it will cut another 20 million tonnes of its steel production capacity in the next two years, state-owned China Securities Journal reported on Saturday. Handan also plans to remove 3.9 million tonnes of coal capacity and 5.9 million tonnes of coke capacity, according to the report.

However, Argonaut Securities analyst Helen Lau said steel output could see less impact from output cuts this winter compared to last as China is allowing provinces to set their own production limits instead of imposing blanket measures.

"Looking ahead, the relaxed winter production cuts should continue to stimulate more production ahead," Lau said in a note.

Still, she said that with China's steel exports hindered by trade frictions with other countries, "the market balance may tip to slight oversupply, suppressing margins".

China's steel exports rose 15.8 percent from a year ago to 5.95 million tonnes in September, government data showed last week. But exports in January-September were down 10.7 percent at 53.08 million tonnes.

Iron ore on the Dalian Commodity Exchange slipped 0.9 percent to 509 yuan a tonne. Coking coal fell 1.4 percent to 1,350.50 yuan and coke dropped 0.4 percent to 2,477 yuan.

(Reporting by Manolo Serapio Jr.; Additional reporting by Muyu Xu in BEIJING; Editing by Joseph Radford and Subhranshu Sahu)

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