Chinese steel futures jumped nearly 3 percent on Wednesday to their strongest level since mid-September as winter production curbs in the world's top steelmaker reduced traders' stockpiles to the lowest in years. Steel mills across northern China were ordered to curb sintering output by up to half from this month through March. Sintering, where iron ore is processed ahead of steelmaking, causes heavy pollution.
Stocks of rebar, a construction steel product, among Chinese traders reached 3.35 million tonnes on November 24, the lowest since at least 2011, according to data tracked by SteelHome consultancy. "This was mainly because of supply shortage due to the winter production cuts that started half a month ago," Argonaut Securities analyst Helen Lau said in a note. With restrictions on iron ore and the low utilisation rate at blast furnaces, steel producers are securing more scrap to produce steel, said Lau.
The most-active May rebar contract on the Shanghai Futures Exchange closed up 2.6 percent at 3,957 yuan ($600) a tonne, after rising as far as 3,966 yuan, its loftiest since September 14. It marked the biggest single-day spike in almost seven weeks for rebar, which has risen in seven of the past eight trading days. Iron ore for May delivery on the Dalian Commodity Exchange rose 2.1 percent to 512.50 yuan per tonne. Coking coal increased 1.3 percent to 1,329.50 yuan.
Lau said the recent price gains in iron ore price were driven by the strength in the steel market. "However in view of the quick decline in utilisation rates at blast furnaces, the actual demand for iron ore is declining," she said. Utilisation rates at Chinese steel mills' blast furnaces dropped by 0.26 percentage points from a week ago to 72.4 percent as of November 24, Morgan Stanley said in a note on Monday. Steel inventory at both traders and mills was the lowest in the past five years due to the winter cuts, the bank said.
Comments
Comments are closed.