SHANGHAI: Shanghai steel futures extended gains to hit an eight-week high on Monday, after China's latest monetary policy easing measure fuelled a rally driven by concerns about output curbs in the world's top steel producer.
Construction steel rebar on the Shanghai Futures Exchange rose as much as 3.3% to 5,532 yuan ($854.47) a tonne, its highest level since May 19. Hot rolled steel coil climbed 3.5% to 5,948 yuan a tonne, also a peak since May 19. Stainless steel jumped 1.8% to 17,495 yuan a tonne.
The People's Bank of China announced on Friday afternoon it would cut the banks' reserve requirement ratio by 50 basis points, effective from July 15, releasing around 1 trillion yuan to underpin an economic recovery that is starting to lose momentum.
Ahead of the PBOC announcement, Shanghai steel contracts were already supported by renewed chatter about production curbs as China stepped up efforts to reduce steel output to meet its carbon emissions goal.
Still, doubts linger if China could stick to the plan.
"Sooner or later the government is going to have to temper its ambitions of lower steel output in 2021 or risk dealing with an expanding speculative asset bubble," said Atilla Widnell, managing director at Navigate Commodities in Singapore.
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