Chinese steel futures rose on Monday, supported by upbeat data and traders replenishing low stockpiles on expectations of firm demand next year, pulling up prices of raw material iron ore.

Growth in China's services sector accelerated to a 16-month high in November, a private survey showed. The survey, along with solid factory activity readings last week, suggest building momentum for China's economy at the end of a year that saw growth stabilise.

The most-traded May rebar on the Shanghai Futures Exchange was up 1.9 percent at 3,190 yuan a tonne by 0316 GMT. On the Dalian Commodity Exchange, May iron ore rose 3.5 percent to 601 yuan per tonne.

"We have not seen any signs of slowdown in steel production," said a Shanghai-based iron ore trader.

"Traders' inventory of steel products is very low so when the steel price goes up, they buy cargo to build their inventory and avoid further price increase," he said.

Stockpiles of rebar, a construction steel product, among Chinese traders rose for a second straight week to 3.68 million tonnes on Dec. 2, according to data tracked by SteelHome consultancy. SH-TOT-RBARINV

The inventory hit a four-month low of 3.51 million tonnes on the week to Nov. 18.

Winter is typically a slow period for China's steel market but traders are preparing for stronger demand after the Lunar New Year break in January, the Shanghai trader said.

Sustained appetite for high-grade iron ore also continues to support prices of the raw material as Chinese mills boost efficiency to use less of costlier coking coal, traders said.

But the wild swings in the futures markets probably remained driven by speculative investors, traders and analysts say, making it tougher for participants in the physical market to strike deals.

Last week, the spot iron ore price .IO62-CNO=MB surged nearly 9 percent on Thursday after sliding about 7 percent on Wednesday. It ended the week down 2.3 percent at $77.79 a tonne, according to data from Metal Bulletin.

 

Source:reuters.com

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