China rebar futures at 2-month high, ore firm

SHANGHAI: Shanghai rebar futures rose by around half a percent to their highest level in more than two months on Wednesday, bolstering iron ore prices as China's social housing construction programme continued to buoy investor confidence.

The most active October rebar contract on the Shanghai Futures Exchange reached 4,938 yuan ($764) per tonne during morning trade on Wednesday, its highest since May 4.

China's daily crude steel output reached 1.955 million tonnes in the first 10 days of July, down 3.1 percent from its record high in late June, but the decline is expected to be limited with mills still seeing strong demand over the summer.

The daily figure amounted to 713.6 million tonnes on an annualised basis, nearly 14 percent higher than last year.

"We expect Chinese steel demand to remain robust, reflecting the social housing programme and development of central and western provinces," the Commonwealth Bank of Australia said in a research note.

Spot iron ore prices stood firm on Wednesday, with steel mills in China continuing to replenish their stocks, supported by rising steel prices.

Chinese steelmakers have been buying more of the key raw material in order to meet production.

"Steel prices continue to rise and low-grade iron ore supplies are falling, allowing spot prices to drift higher," said an iron ore trader in eastern China.

Spot offers for iron ore were steady, with Australian 62-grade Newman fines quoted at $179-$181 a tonne, including freight, and Indian 63.5/63 fines offered at $182-$184, according to Chinese consultancy Umetal.

Iron ore indexes, tracking spot deals in China and used by global miners as the basis for quarterly contract prices, were mixed on Tuesday.

The Steel Index's 62-grade measure was flat at $174.40 a tonne and a similar benchmark by Metal Bulletin dipped by 13 cents to $173.82.

The Platts index rose half a dollar to $176.

However, Singapore Exchange-cleared swap contracts fell across the board, reflecting investor concerns about demand for the raw material in the months ahead.

Copyright Reuters, 2011