Shanghai steel edges up as China pledges more support for economy

1 November 2018

China’s construction steel rebar prices edged higher on Thursday after three straight sessions of declines, as a top decision-making body of the ruling Communist Party vowed to support the economy in the face of increasing pressures.

The politburo said on Wednesday it will take more timely steps to support its economy and will stabilize employment, finance, foreign trade and investment, reaffirming a pro-active fiscal policy and prudent monetary policy.

“The politburo’s promises will help buoy market expectation in the long term, but we still need to assess the implementation of actual policies,” CITIC Futures analysts said in a note in Mandarin.

The environment ministry reiterated on Wednesday that China will not relent in its efforts to fight against toxic air pollution even as the economy slows, although it also admitted that the battle is becoming increasingly difficult.

The country’s biggest steelmaking province, Hebei, has issued second-level smog alert across 10 major cities, forcing industrial plants to halve their production or even shut down during the alert.

Emergency measures took effect from Oct.31 until Nov.5, according to a statement from the provincial government.

Benchmark Shanghai rebar prices were up 0.1 percent at 4,139 yuan ($594.23) a tonne as of 0144 GMT.

Prices were also driven higher by firm profit margins at steel mills. According to the China Iron and Steel Association, profits in the steel sector surged 86 percent from January to September this year, while the overall debt-to-asset ratio of its member companies reached 66.11 percent by end-September, down 3.91 percentage points from a year earlier.

Average profit margins at steel mills are above 1,000 yuan a tonne, according to Huatai Futures.

Dalian iron ore sipped 0.2 percent to 532 yuan a tonne. It gained 8.1 percent last month, its best since November 2017.

The most-traded coking coal futures on the Dalian Commodity Exchange rose 1.7 percent to 1,409.5 yuan a tonne, while coke prices gained 0.7 percent to 2,400 yuan a tonne.