SINGAPORE, Aug 23: Shanghai steel futures rebounded on Friday after a three-day slide, backed by expectations a stabilising Chinese economy would boost demand in the world’s top consumer as mills keep output high ahead of the peak consumption season.
That should support demand for iron ore, although prices of the steelmaking raw material came off five-month highs this week as the restocking momentum slowed somewhat.
Data on Thursday showing China’s manufacturing activity quickening to a four-month high in August added to recent signs that the world’s No. 2 economy is stabilising after more than two years of slower growth.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange was up nearly 1 percent at 3,811 yuan ($620) a tonne by 0306 GMT, after hitting a 1-1/2-week low of 3,762 yuan on Thursday.
But Friday’s price gain was only enough to counter losses in the past three sessions, with rebar on track to end the week flat from the prior week.
Still, the price of rebar or reinforcing bar which is used in construction, has increased nearly 5 percent this month, and could stretch gains as Chinese steel producers brace for better demand in September and October, typically a brisk consumption period as better weather fuels increased construction activity.
‘Our channel checks with steel-mill executives last week suggest that output has remained high in August, with capacity utilisation in the top-producing province of Hebei running at 90 percent or more,’ Standard Chartered Bank analyst Judy Zhu said in a report.
Zhu estimates China’s crude steel output to reach 63-65 million tonnes in August and September, taking third-quarter production to 194 million, 4 percent higher than the bank’s previous projection.
‘This results in 12 million tonnes more iron ore demand than our previous forecast, and is the key reason for the upward revision of our third-quarter price forecast,’ said Zhu, who increased her price estimate for iron ore to $130 a tonne for July-September from $112.
Benchmark 62-percent grade iron ore <.IO62-CNI=SI> was little changed at $137.70 a tonne on Thursday from $137.80 the previous day, according to data provider Steel Index.
For the week, iron ore is nearly flat, with prices consolidating after racing to a five-month peak of $142.80 on Aug. 14.
‘I think demand for cargo is still good since China’s steel production remains high,’ said a Singapore-based trader. Traders are also taking positions on expectations of further gains in spot prices, he said.
Global miner BHP Billiton sold a cargo of 57.7-percent grade Australian Yandi iron ore fines at $128 a tonne at a tender on Thursday, surpassing market predictions of between $125 and $126, traders said.
Rio Tinto is offering 165,000 tonnes of 61-percent grade Pilbara iron ore fines and Vale is selling 186,664 tonnes of 60.97-percent grade iron ore at separate tenders closing later on Friday, a trader in Shanghai said.
China’s crude steel output averaged at 2.14 million tonnes a day in the first 10 days of August, up almost 3 percent from July 21-31, estimates from the China Iron and Steel Association earlier this week showed.
That puts the country’s annualised output at a record 781 million tonnes, topping last year’s 716.5 million tonnes. (AGENCIES)
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