Chinese steel futures rose for a fifth straight day on Monday amid expectations that demand in the world’s top consumer of the building material will pick up along with construction activity, but prices came off the day’s peaks.

Steelmaking raw materials iron ore, coking coal and coke also pared gains after rising as much as 7.6 percent earlier in the session.

Along with hopes of a recovery in demand, production curbs in China’s key steel city of Handan had helped spur prices early in the day as authorities sustained the fight against pollution.

The most-active rebar on the Shanghai Futures Exchange closed up 0.6 percent at 3,344 yuan ($533) a tonne, after surging as much as 4.7 percent to a nearly two-week high of 3,480 yuan.

“I believe demand will pick up from the first half of April as the construction season gets underway so consumption of steel products will increase,” said a Beijing-based trader.

The restrictions in steel production in some Chinese cities were also supporting prices, although the output limits were smaller compared during winter when northern Chinese cities were ordered to curb them by up to half.

China’s city of Handan in northern Hebei province has ordered steel mills to cut production by around 25 percent as part of new measures to curb pollution from April 1 to Nov. 15.

Handan joins China’s biggest steel-producing city, Tangshan, also in Hebei, which last month decided to extend production restrictions on steel mills beyond the end of the heating season on March 15.

As steel futures recoiled, so did prices of its raw materials.

Iron ore on the Dalian Commodity Exchange ended 1.9 percent higher at 446.50 yuan a tonne, after initially rallying 5.7 percent to 463 yuan.

Coke closed up 3.1 percent at 1,848 yuan per tonne, having jumped as much as 7.6 percent when trading opened. Coking coal gained 1.9 percent to 1,281 yuan, well off the day’s peak of 1,314 yuan.

Stocks of iron ore at China’s ports reached a record high of 161.68 million tonnes on Friday, up 9 percent this year, according to data tracked by SteelHome consultancy. SH-TOT-IRONINV

While iron ore prices have generally followed the trend in the steel market, traders say the mountain of stocks of the raw material at China’s ports remain a major headwind, keeping sentiment bearish.

“Even as winter production cuts in China draw to a close and blast furnaces are gradually resuming operation, there has not been any big restocking demand as most mills are choosing to draw down on iron ore stocks built earlier,” the Singapore Exchange said in a report.

 

Source: in.reuters.com

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