Analysts attributed the move to production cutbacks brought on by electricity taxes and power cuts the government implemented to meet energy-saving targets. China stipulated five years ago that energy consumption would drop by 20 percent per unit of GDP over the 2005 level by the end of this year.

Baosteel raised hot-rolled coil prices by 300 yuan ($44.39) per ton, cold-rolled coil prices by 200 yuan ($29.65) per ton and some non-oriented electrical steel prices by 380 yuan ($56.33) per ton.

"The government's measures have reduced the supply of steel products, pushing up spot and futures prices ... Many traders began buying into steel a few weeks ago, obviously expecting the price hike," Li Na, a steel analyst with Green Futures, told the Global Times.

Daily crude steel production in China shrank to 1.7 million tons in August. Though the figure was slightly higher than the previous month, it represents a large drop from April and May when more than 1.8 million tons of crude steel were produced every day.

Recent electricity cutbacks may lead to a 25.7-million-ton fall in annual steel output this year, industry watcher Mysteel said last week.

But seasonal factors may also be at play. Green Futures Li said that the price increases will not continue into November and December, the traditional off-season for steel sales.

Futures are also not showing irregularities. "Steel products sell well in September and October. The market is acting within expectations," Li said

However, Ma Zhongpu, analyst with research firm Umetal, expects the measures to have a negative impact.

"Steel price hikes will continue through the last two months of the year as long as these measures remain strictly enforced," Ma told the Global Times.

"But there is still a lack of demand, and overcapacity and high inventories are still rampant," Ma said.

"These measures cannot solve the industry's pollution problems. The country should encourage emission reductions through promoting better technology."