BEIJING: Prices of Chinese steel products and steelmaking ingredients climbed on Monday as a trade ceasefire between Beijing and Washington helped buoy market sentiment amid concerns over a supply glut.
Benchmark construction steel rebar futures on the Shanghai Futures Exchange rallied 7 percent to 3,842 yuan ($554.58) when the market opened at 0100 GMT, clocking their best intraday gain in nearly 14 months, before closing up 2.9 percent at 3,695 yuan a tonne.
Shanghai hot-rolled coil futures rose as much as 6 percent to a two-week peak and closed 2.6 percent higher at 3,537 yuan a tonne.
Prices were buoyed by trade talks between Beijing and Washington, which helped boost investor sentiment, said Zhuo Guiqiu, an analyst with Jinrui Futures.
The leaders of China and the United States have sealed a 90-day truce in their trade war after high-stakes talks in Argentina at the weekend, with U.S. President Donald Trump agreeing not to escalate tariffs "at this time" and China agreeing to purchase more products from the United States.
"The market has seized this uncommon opportunity to correct recent backwardation on steel prices, which were dampened by an extremely pessimistic outlook amid slowing economic growth," said Zhuo.
Steelmaking raw materials also picked up alongside steel prices.
The most-active iron ore futures for January delivery on the Dalian Commodity Exchange jumped as much as 5.9 percent, their sharpest intraday gain since early August, before trimming gains and closing up 1.9 percent at 463 yuan a tonne.
Dalian coking coal ended up 3.8 percent, while coke futures finished 5.5 percent higher.
However, analysts warned that the rally might be temporary amid weak market fundamentals.
Steel output is still pretty high and there has been no stimulus from the government to boost demand, said Zhuo.
Utilisation rates at Chinese steel mills dipped 0.83 percentage points to 66.71 percent last week as of Nov. 30 from the prior week, data compiled by consultancy Mysteel showed. But it is still much higher than 63.12 percent in the same period last year.
"Steel mills have not started to reduce production, which slowed down the process of easing concerns over glut," CITIC Futures analysts said in a note. "We expect steel prices would stay low as demand remains at a seasonal downward trend."
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