NEWS

China iron ore, steel soar on strong sector PMIs, restocking demand

Monday, Jul 31, 2017

China's iron ore futures surged nearly 8 percent on Monday, potentially their best daily performance since November 2016, boosted by data showing ongoing high levels of activity in the steel sector and strong restocking demand at mills.

"Mills are actively buying raw materials preparing to seal profits," said Xu Bo, a steel analyst at Haitong Futures.

"The market is also being fuelled by Beijing's determination to crack down on low-grade steel," Xu said.

Chinese Premier Li Keqiang on Saturday said Beijing remains fully committed to eliminating low-end steel products and excess mill capacity, and to preventing furnaces that have already been closed from reopening, according to a Xinhua news report.

Li's comments and signs that indicate increased activity at the mills that are still operating helped to power both iron ore and steel futures during the morning session.

Data from the China Federation of Logistics & Purchasing showed on Monday that the Purchasing Managers' Index (PMI) for the steel sector rose to 54.9 in July, the fastest pace since April 2016.

The most-traded iron ore contract on the Dalian Commodity Exchange surged nearly 8 percent to 570.5 yuan ($84.81) a tonne by midday, hitting its highest since April 6, 2017. If the market is holding near this peak at close, it will be the biggest one-day gain since November of last year.

The most-active steel rebar contract on the Shanghai Futures Exchange gained 4.5 percent to 3,724 yuan a tonne, hitting a top of 3,730 yuan, highest since Dec. 12, 2013.

China has eliminated around 120 million tonnes of low-grade steel capacity and 42.39 million tonnes of crude steel capacity, equivalent to 84 percent of its target for the whole year, in the first half of this year.

Other steelmaking raw materials also posted big jumps on Monday on the sector's PMIs. September coking coal futures rose 5.3 percent to 1,338.5 yuan a tonne.

Coke futures hiked 6.4 percent to 2,074.5 yuan a tonne, hitting intraday peak at 2,075 yuan a tonne, the highest since April 2012.

Spot rebar prices rose just 0.02 percent to 3,946.59 yuan a tonne on Friday, according to data on the Mysteel website.

 

Source:af.reuters.com

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