Tuesday, 17 March 2015 12:53
SINGAPORE: Shanghai steel futures stretched gains to a fourth straight session on Tuesday, reflecting expectations that demand from top consumer China would recover, with the government seen ready to do what it can to stimulate the economy.
That hope along with anticipation of a seasonal pickup in construction activity as the weather gets warmer fuelled a rebound in steel prices from last week’s record lows.
The most-traded October rebar contract on the Shanghai Futures Exchange closed up 0.4 percent at 2,512 yuan ($ 402) a tonne.
“We are seeing some buying activity back in physical steel. People are expecting seasonal demand to return at the end of this month or early April,” said a trader in Shanghai.
Also helping sentiment were comments from Premier Li Keqiang on Sunday that China had plenty of room to manoeuvre its policy and spur its economy, having avoided using strong, short-term stimulus in recent years.
Li’s comments suggest Beijing can do much more to boost growth, improving the outlook for steel demand. Last year, China’s steel use shrank for the first time in three decades. Even so, China must also deal with the overcapacity that has burdened it with a huge surplus.
China’s steel sector needs to consolidate to shrink the glut that has depressed prices and left dozens of firms with heavy debts, said Deng Qilin, chairman of state-owned Wuhan Iron and Steel Group, China’s fourth-biggest producer.
Spot iron ore was steady below $ 60 a tonne amid a global surplus that has cut prices by a further 18 percent in 2015 after last year’s 47 percent slide.
Iron ore for immediate delivery to China’s Tianjin port was unchanged at $ 58.10 a tonne on Monday, according to The Steel Index (TSI). It touched $ 57.70 last week, the lowest since TSI began publishing prices in late 2008.
“There’s still plenty of cargoes available and that would keep prices under pressure,” said the Shanghai trader.
Stocks of imported iron ore at major Chinese ports remained above 100 million tonnes last week, according to data from industry consultancy Steelhome, equivalent to more than a month’s worth of imports.
Copyright Reuters, 2015