SHANGHAI, July 4: Shanghai steel futures stretched gains, hitting a fresh six-week high on Thursday, as traders bet Beijing’s possible moves to cope with pollution in the steel sector could cut capacity.
The most active rebar contract for January delivery on the Shanghai Futures Exchange jumped as high as 3,635 yuan ($590) a tonne, the highest since May 22. By the midday break, it had dropped back to 3,619 yuan, up 0.8 percent.
Market talk that Beijing may roll out tougher anti-pollution measures by targeting outdated steel production capacities encouraged investors to bid up prices.
‘If the (anti-pollution) measures are implemented, it will have a big impact on steel sector in Hebei as the top steel producing province,’ Lu Xiaohua, an analyst with Everbright Futures said in a research note.
Lu also expected that steel mills would cut production as many of them are losing money.
A few steel mills that buy semi-finished products to produce rebar in Tangshan, a top steel production city in Hebei, have been ordered to shut down after failing to meet environment protection demand, traders said.
The gains in steel prices also encouraged iron ore traders and drove up iron ore swaps, despite resistance in physical buying from steel mills.
‘This round of gains seems stronger than expected, and some mills’ inventories are low, but my customers still don’t have purchase plans in near future and I am not bullish on the near-term market,’ said an iron ore trader in Beijing.
Iron ore swaps for August were offered at $120.5-121.5 a tonne, up about one dollar from Wednesday, traders said.
Traders are eyeing a BHP Billiton tender for 90,000 tonnes 62 percent Australian iron ore fines that closes later Thursday for a clue on the direction of the spot market.
Benchmark iron ore <.IO62-CNI=SI> rose for the fifth consecutive day to exceed $120 a tonne on Wednesday, hitting $120.50 a tonne, its loftiest since June 20.
Shanghai rebar futures and iron ore indexes at 0444 GMT
Contract Last Change Pct Change SHFE REBAR JAN4 3619 +27.00 +0.75 THE STEEL INDEX 62 PCT INDEX 120.5 +1.20 +1.01 METAL BULLETIN INDEX 120.59 +0.60 +0.50
Rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day.
($1 = 6.1308 Chinese yuan)
(agencies)
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