SINGAPORE: Shanghai steel futures climbed over 1 percent on Thursday, tracking equities on hopes that China will take steps to boost markets, while spot iron ore prices rose marginally on limited restocking by some Chinese steel mills.
Shanghai steel rebar futures have dropped around 14 percent this year on slower Chinese demand, slashing appetite for iron ore, the biggest revenue earner for top miners Vale, Rio Tinto and BHP Billiton .
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange closed up 1.2 percent at 3,568 yuan ($570) a tonne, following Shanghai equities which bounced off 2009 lows on talk that Chinese authorities might implement measures to prop up markets.
Benchmark iron ore with 62 percent iron content rose half a percent to $104.20 a tonne on Wednesday, according to data provider Steel Index.
"There are very few inquiries and deals as the holidays approach. Many mills have already finished with their restocking, although a few are still in the market," said an iron ore trader in the port city of Rizhao in China's eastern Shandong province.
Chinese markets are shut all of next week for the National Day break.
Iron ore prices fell to three-year lows at below $87 a tonne earlier this month as waning steel demand in China cut appetite for the steelmaking ingredient. Prices have since bounced back to above $100, though they remain 30 percent off this year's peak as Chinese steel mills curb output.
"I think iron ore prices have hit the bottom, but a stronger recovery depends on steel demand which remains sluggish so far," said Henry Liu, head of commodity research at Mirae Asset Securities.
Baoshan Iron and Steel Co, China's biggest listed steelmaker, said it had suspended production at a loss-making plant in Shanghai, in a sign of the intense pressure on the sector.
Baosteel is one of the first major Chinese mills to publicly disclose it is suspending production, but with the world's second-biggest economy cooling and banks restricting lending to an industry that built up $400 billion of debt during years of double-digit growth, more suspensions are likely.
The more than $150 billion of infrastructure projects that the Chinese government approved recently will have minimal impact on steel demand in the world's biggest consumer, a Baosteel official told an industry conference.
The hardest hit among industrial commodities this year by China's slower economic growth, iron ore prices have lost about a quarter this year, although Vale said it would push ahead with all its projects.
Vale expects prices to hover between $100 and $120, depending on how fast low cost production comes onstream, said Jose Carlos Martins, executive director for ferrous and strategy.
Comments
Comments are closed.