Shanghai steel futures traded near their strongest level since mid-September on Friday and chalked up their biggest weekly gain in four months, supported by tighter supply in the world's top producer.

Steel mills across northern China were ordered to slash sintering output by up to half from this month through March as part of Beijing's battle against smog. Sintering, where iron ore is processed ahead of steelmaking, causes heavy pollution.

Some steel producers are cutting sintering output by less than expected to chase strong prices, said a Beijing-based trader.

"It's driven by the profit so steel mills don't want to cut down so much," she said.

The most-active rebar on the Shanghai Futures Exchange closed 0.5 percent lower at 3,977 yuan ($602) a tonne. But the construction steel product earlier hit 4,018 yuan, not far below Thursday's intraday high of 4,043 yuan, which was its highest since Sept. 13.

Rebar gained almost 5 percent this week, the most since early August.

Rebar producers had been earning more than 1,000 yuan per tonne in margins this year amid China's infrastructure push and tighter supply.

Stockpiles of rebar at Chinese traders dropped to 3.35 million tonnes last week, the smallest since at least 2011, according to SteelHome consultancy. <SH-TOT-RBARINV>

Stronger steel prices had helped lift raw materials iron ore and coking coal, with both posting weekly gains.

The May iron ore contract on the Dalian Commodity Exchange rose as far as 529 yuan per tonne, its highest since Sept. 19, before ending at 526 yuan, up 1.9 percent.

Spot prices have similarly jumped, with iron ore for delivery to China's Qingdao port <.IO62-CNO=MB> climbing 0.3 percent to $68.13 per tonne on Thursday, its highest since Sept. 20, according to Metal Bulletin.

Also on Friday, Dalian coking coal futures rose 2.4 percent to 1,403 yuan a tonne and coke jumped 3.1 percent to 2,194 yuan.