Shanghai steel rises on strong demand outlook, hoists iron ore
15 March 2018
Chinese steel futures climbed nearly 1 percent on Thursday, supported by expectations that demand in the world’s top consumer will strengthen with the country’s construction industry gearing up for business as spring arrives.
The firmer steel market helped prices of raw material iron ore gain for a second session in a row, pushing them away from a nearly four-month low reached earlier this week.
The most-actively traded rebar for May delivery on the Shanghai Futures Exchange was up 0.8 percent at 3,737 yuan ($592) a tonne by 0230 GMT. The construction steel product touched 3,657 yuan on Wednesday, its lowest since Nov. 20.
Government data showed on Wednesday that China’s crude steel output rose 5.9 percent in January and February in a sign that mills ramped up production to take advantage of firm prices.
The data implies that apparent steel consumption increased 12.2 percent in the first two months of the year, compared with 4.8 percent growth in December, Morgan Stanley analysts said in a note.
That reflected China’s closure of producers of low-quality steel last year and a “healthy order book in early 2018”, they said.
Chinese steel output is expected to rise further from tomorrow when winter curbs on producers in northern cities are lifted as the winter heating season ends. Some cities, including top-producing Tangshan, plan to extend the output restrictions.
“After mid-March, construction activity will increase and we should see more consumption of rebar,” said one Shanghai-based trader.
Iron ore on the Dalian Commodity Exchange rose 0.5 percent to 487.50 yuan a tonne, above Monday’s 475.50 yuan, its weakest since Nov. 20, and adding to Wednesday’s 2.1-percent jump.
Firmer futures have spurred a similar recovery in spot prices. Iron ore for delivery to China’s Qingdao port. IO62-CNO=MB rose 2.7 percent to $71.64 per tonne on Wednesday, according to Metal Bulletin. The spot benchmark had dropped below $70 this week for the first time since December.