China steel rises on firm demand, supply limits; iron ore steady

3 March 2017

Steel demand in China improved in March as construction activities picked up amid warmer weather, while steel mills in some northern regions were ordered to cut output to reduce smog. Rebar is mainly used for construction.

“Rebar is the safest commodity futures for now as rebar supplies have been hit hard by the government’s environmental crackdown, and now demand is increasing,” said Li Wenjing, analyst with Industrial Futures in Shanghai.However, she also expects the gains to ease after the production cuts in Tangshan, a leading steel-producing city, end in mid-March.

The most-active rebar on the Shanghai Futures Exchange climbed 1.1 percent to close at 3,553 yuan ($516) a tonne. It touched a three-year peak of 3,648 yuan on Monday.Iron ore on the Dalian Commodity Exchange ended nearly flat at 694.50 yuan a tonne.

Traders said the price of iron ore, the main steel-making ingredient, had been supported by firm demand for steel. But price gains in iron ore were capped by production cuts at mills.

Iron ore for delivery to China’s Qingdao port was little changed at $91.26 a tonne on Wednesday, according to Metal Bulletin. That was below a 30-month peak of $94.86 reached on Feb. 21.

China has ordered steel and aluminium producers in 28 cities to slash output during winter as Beijing intensifies its war on smog, a policy document showed.

While the closure plans could lift steel prices, weaker demand for iron ore “should see prices trend lower,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

“However, these price implications could take a while to play out, and if recent history has taught us anything it is that higher downstream prices could support upstream prices in the short term,” wrote Dhar.Also on the Dalian exchange, coking coal rose 1.6 percent to 1,318.50 yuan a tonne, and coke gained 1.7 percent to 1,810.50 yuan.