Shanghai rebar jumps 2 pct on hopes for post-winter demand

21 November 2017

Chinese rebar steel futures climbed 2 percent on Tuesday, gaining for a second straight day on expectations that demand in the world’s top consumer would bounce back sharply when production curbs are lifted after winter.

Chinese steel mills, mainly across the country’s north, have been ordered to curb output during winter as part of Beijing’s campaign to limit air pollution. The curbs apply from this month through March.

“Investors continue to look towards the pent up demand in early 2018 when the winter production constraints are removed,” ANZ analysts said in a note.

The most-active rebar contract for May delivery on the Shanghai Futures Exchange was up 2 percent at 3,738 yuan ($563) a tonne by 0229 GMT.

Rebar prices were also supported by tighter supply as the winter output curbs are enforced.

Inventory of rebar among Chinese traders had fallen to 3.61 million tonnes as of Nov. 17, the lowest level in a year, according to data compiled by SteelHome consultancy. SH-TOT-RBARINV

Steel inventory at both distributors and mills have been dropping, reflecting the winter production cuts, Morgan Stanley analysts said in a report

Gains in steel prices helped lift raw material iron ore. The most-traded iron ore for January delivery on the Dalian Commodity Exchange was up 1 percent at 470 yuan per tonne.

On Monday, iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 1.4 percent to $63.47 a tonne, the highest since Sept. 27, according to Metal Bulletin.

The increase in iron ore prices came even as stockpiles of the steelmaking commodity continued to rise in China.

Inventory of imported iron ore at China’s major ports reached 138.48 million tonnes as of Friday, the most since Aug. 4, SteelHome data showed. SH-TOT-IRONINV

“We have been cautious in reading too much into port stockpiles given that a large proportion of it is low-grade,” said Commonwealth Bank of Australia analyst Vivek Dhar.

“China’s steelmakers have shown a preference for higher grade ores, as well as lumps, to boost productivity and limit emissions. That preference, which looks structural, suggests that the iron ore market is segmenting based on quality.”