Shanghai rebar extends rally to four-year high on firm demand

5 August 2017

Chinese rebar steel futures jumped more than 2 percent to their highest in almost four years on Friday, reflecting firm demand for the building material in the world's top consumer.

Rising steel prices have boosted profit margins among Chinese mills, potentially encouraging them to ramp up output. Prices of raw material iron ore also rose.

As steel margins strengthen further, "steel producers will have more motivation to churn out more steel products to meet demand", Argonaut Securities analyst Helen Lau said in a note this week.

"Against this backdrop, we expect both steel and iron ore prices to rise further."

The most-active rebar on the Shanghai Futures Exchange was up 2.5 percent at 3,838 yuan ($571) a tonne, its strongest level since September 2013.

The construction steel product has gained nearly 8 percent so far this week, its biggest such increase since late June.

Higher Chinese infrastructure spending has spurred demand for construction steel products, tightening the market as Beijing simultaneously clamps down on producers of highly polluting, lower grade rebar.