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Shanghai rebar stretches rally to 4th day on output cuts, falling stocks

Shanghai rebar steel futures climbed nearly 2 percent on Wednesday, extending gains into a fourth session, as supply tightens amid output curbs and inventories with traders drop in a sign of firm demand.

Mills in northern Chinese cities are reducing production in line with the government’s orders to limit pollution over winter, helping steel prices climb 6 percent from mid-October.

At the same time, stocks of steel products at Chinese traders have also been declining, underlining robust demand ahead of winter.

Inventories of rebar, a construction steel product, had dropped almost 5 percent from early October to 4.15 million tonnes as of Oct. 20, data compiled by SteelHome consultancy showed.

The most-active rebar on the Shanghai Futures Exchange was up 1.7 percent at 3,792 yuan ($571) a tonne by 0229 GMT, after earlier touching a one-week high of 3,814 yuan.

While some steel mills are already scaling back activities, Marex Spectron analysts said “such efforts could be slowed if margins remain high as it remains economical for mills to produce as much as steel as possible to capture profits.”

Firmer steel futures lifted prices of raw material iron ore. The most-traded January iron ore on the Dalian Commodity Exchange rose 0.7 percent to 463 yuan a tonne.

Demand for high-grade iron ore cargoes was “still healthy,” said a Shanghai-based iron ore trader.

With some mills ordered to cut their production time and output, “they have to try to produce as much steel as possible within that period, so they have to use high-quality iron ore to increase their productivity,” he said.

Iron ore for delivery to China’s Qingdao port edged up 0.7 percent to $62.42 a tonne on Tuesday, according to Metal Bulletin.
Source: Reuters (Reporting by Manolo Serapio Jr.; Editing by Subhranshu Sahu)

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