Chinese steel and iron ore futures hit three-week highs on Monday, reflecting optimism that demand for the two commodities will perk up as the world's top consumer heads into the seasonally brisk consumption period over the next two months. Hopes that China will move to stimulate a slowing economy, including forging ahead with infrastructure investment, also supported investor sentiment. Dalian iron ore jumped 3.5 percent and Shanghai rebar rose more than 1 percent.
"Traders are trying to restock steel in anticipation of consumption going up in April," said Zhou Ting, analyst at Jinrui Futures in Shenzhen. Steel demand in China usually strengthens in April and May along with construction activity, while investors are also anticipating the government will boost the economy following recent weak manufacturing and trade indicators.
"There's some expectation of increased investment in infrastructure to prevent the economy from slowing further. The aim is to boost consumption in the long run, but for the economy to expand in the short term, the government needs to continue to invest," said Ting. China's Premier Li Keqiang sought on Friday to reassure jittery global investors that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.
The most-active rebar for October delivery on the Shanghai Futures Exchange was up 1.1 percent at 3,324 yuan ($540) a tonne by midday, after touching a session high of 3,331 yuan, its loftiest since March 7. Rebar, a construction steel product, rose nearly 2 percent last week on a settlement basis, its biggest weekly increase since mid-August. But it is still down more than 3 percent so far in March, on course for a fourth straight monthly loss.
Hot-rolled coil futures in Shanghai, launched on March 21, rose 0.9 percent to 3,402 yuan per tonne. Stocks of steel products held by traders in China have been falling over the past four weeks, pointing to firm demand. The inventory fell to 19.27 million tonnes last week from 19.73 million tonnes the previous week, according to data from industry consultancy Mysteel. Inventory of rebar, which accounts for about half of the stockpiles, dropped to 9.61 million tonnes from 9.95 million tonnes during the period.
Increased demand for steel would similarly lift consumption of raw material iron ore. The most-traded September iron ore contract on the Dalian Commodity Exchange climbed as much as 3.8 percent to 798 yuan a tonne, its highest since March 6, and was last up 3.5 percent at 796 yuan.But it was still down 1.4 percent for the month, on track for a fourth monthly fall since the Dalian bourse launched iron ore futures in October. Iron ore for immediate delivery to China was unchanged at $112.30 a tonne on Friday, according to data compiler Steel Index.