Shanghai rebar bounces off one-week low on tighter supply

Chinese steel futures rebounded from a one-week low on Friday, supported by tighter supply due to government-imposed production curbs as part of a campaign to rein in pollution during winter.

Steel output in China, the world’s top producer, dropped to the lowest in nine months in November because of the winter cuts that will be in place through March, data showed on Thursday.

The most-active rebar for May delivery on the Shanghai Futures Exchange closed up 0.1 percent at 3,824 yuan ($579) a tonne, well off the day’s low of 3,770 yuan, its weakest since Dec. 7.

“The restrictions on steel production are still limiting supply, and for the moment, demand is still okay, especially in the southern part of China,” said a Shanghai-based trader.

“Some areas in the south are lacking supply and they have to import from the north.”

Stockpiles of construction product rebar held by Chinese traders fell to 2.85 million tonnes on Dec. 8, the lowest since at least December 2011, according to data tracked by SteelHome consultancy.

Iron ore on the Dalian Commodity Exchange rose 1.4 percent to 508 yuan a tonne and coke jumped 1.7 percent to 2,056 yuan. Both commodities slid on Thursday, with coke dropping more than 4 percent.

Some traders remain wary on whether the strength in iron ore prices, which largely tracked that of steel most of this year, can be sustained given ample supply.

While steel stockpiles have been dropping, inventory of imported iron ore at China’s major ports reached 142.57 million tonnes as of Dec. 8, the highest since at least 2004, according to data tracked by SteelHome consultancy.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slipped 0.9 percent to $69.94 a tonne on Thursday, according to Metal Bulletin.

Source: Reuters

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