SHANGHAI, June 17: Shanghai steel futures jumped more than 2 percent to hit a near three-week high on Monday on rising raw material costs, although Chinese demand remains in check due to slower economic growth and overcapacity.
The most active rebar futures on the Shanghai Futures Exchange posted the biggest daily gains since early January to hit a session high of 3,508 yuan ($570) a tonne, a level last seen on May 28.
A rebound in iron ore prices late last week, helped by post-holiday restocking by some steel mills, encouraged traders to push up rebar, lifting it off nine-month lows.
However, analysts still expect steel demand to be curbed by cooling growth in the world’s largest steel producer and consumer.
‘Traders are keen to lift prices when seeing billet inventories in some northern Chinese regions falling and iron ore prices rising,’ said Dai Xianghui, analyst with SDIC CGOC Futures in Beijing.
Average daily crude steel output fell nearly 2 percent by late May from a record 2.193 million tonnes in early May. Traders said this could help ease the supply glut if the modest cutback is increased in coming weeks.
Iron ore prices gained 1.4 percent to $113.6 a tonne last Friday, the highest since June 6, according to information provider the Steel Index.
Billet, a semi-finished steel product used to make rebar for construction sector, gained 50 yuan to 2,970 yuan a tonne over the weekend after slumping over past few weeks, traders said.
Evidence has mounted in recent weeks that China’s economic growth is fast losing momentum, and risks are rising that it will fall further in the second quarter, suggested by weak May export data and domestic activity.
‘Stagnant growth in China’s economy means that steel consumption will not see any big pick-up in near term, so I don’t think the rebound will be sustainable,’ Dai added. ($1 = 6.1308 Chinese yuan)
(agencies)
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