Chinese steel futures extend gains, but demand worries drag

12 January 2018

Chinese steel futures rose for a third day on Thursday after Beijing ramped up efforts to restrict new steel production to sap overcapacity and help clear pollution, but worries over demand capped gains.

The most active rebar on the Shanghai Futures Exchange edged up 0.1 percent to 3,838 yuan ($589.81) a tonne.

China has issued stricter rules on building new steel production capacity to replace obsolete facilities, a move that helped push steel prices into positive territory this week.

“The latest government rules to rein in building new capacity continued to restore sentiment, and there are signs of steadiness - at least for semi-finished steel prices - this week after a big dive a week ago,” said Kevin Bai, an analyst with CRU in Beijing.

But slower winter demand will continue to weigh on prices before the Lunar New Year holidays next month, Bai added.

Physical prices for rebar dropped 350 yuan to 3,960 yuan a tonne last week, according to CRU assessment.

Iron ore on the Dalian Commodity Exchange on Thursday had dropped 0.4 percent to 556 yuan a tonne.

Coke fell 0.5 percent to 2,029.5 yuan a tonne, while coking coal closed 0.7 percent higher at 1,377 yuan a tonne after a slight dip during early trade on Thursday.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell $0.16 to $78.31 a tonne on Wednesday, according to Metal Bulletin.