Shanghai steel prices edge up on firm demand ahead of winter

23 October 2018

Shanghai rebar steel futures inched up on Tuesday, buoyed by firm demand ahead of winter when construction usually slows in northern China due to frigid conditions and anti-pollution regulations.

Stockpiles of steel products at Chinese traders fell by 370,000 tonnes to 10.3 million tonnes in the week to Oct. 19, according to data compiled by Mysteel consultancy.

Mysteel said rebar inventory dropped 6.4 percent to 4.12 million tonnes that week, although hot-rolled coil stockpiles grew 0.8 percent to 2.4 million tonnes.

“We think demand in the near-term remains strong, with consumption from the construction sector increasing drastically, which indicates people are working against the clock (before winter),” analysts from Huatai Futures said in a note.

Construction activity typically slows substantially over winter in northern China as freezing conditions close many building sites.

In parts of the north such as smog-prone Beijing-Tianjin-Hebei, building work is also curtailed by rules designed to curb dust over the dry winter months.

The most-active rebar contract on the Shanghai Futures Exchange had risen 0.7 percent to 4,164 yuan ($599.84) a tonne by 0140 GMT.

Longer term, economic and industry research firm Fitch Solutions expects Chinese demand for steel to remain supported over the rest of the year and into 2019 amid a wave of infrastructure spending.

Prices for steelmaking raw materials were mixed on Tuesday. Dalian iron ore futures for January delivery climbed 0.8 percent to 525.5 yuan a tonne.

Dalian coking coal was little changed at 1,373 yuan a tonne, while coke futures slid 0.3 percent to 2,371 yuan.

Weekly utilisation rates at blast furnaces in steel mills across the country dipped 0.28 percentage points in the week until Oct. 19 from the week before due to emergency anti-pollution measures in Hebei province, according to Mysteel data. However, rates still reached 68.37 percent.

The top steelmaking city of Tangshan has issued detailed plans for cutting production at individual steel mills, but has not yet instructed producers when to start enforcing the rules.