Shanghai steel hits 5-week high, coke jumps

Manila

CHINESE steel futures climbed to their strongest level in five weeks on Monday, supported by falling stockpiles that pointed to a pick-up in construction demand, with raw material iron ore scaling a one-month peak.

Coke futures also rallied to a five-week high, rising more than 4 per cent at one stage, as a source said a group of small Chinese producers is considering slashing output to revive prices.

The most-active rebar on the Shanghai Futures Exchange rose as far as 3,555 yuan (S$745) a tonne, its loftiest since March 16, before closing at 3,544 yuan, up 2 per cent.

Inventories of rebar, a construction steel product, had dropped 16 per cent to 8.25 million tonnes on April 13 from a five-year high in mid-March, data compiled by SteelHome consultancy showed.

Some Chinese steelmakers have increased prices over the weekend in anticipation of firmer demand, said an iron ore trader in Shanghai.

Steel demand in China, the world's top consumer, is usually strongest in April and May when the construction sector is at its busiest time of the year.

"The construction steel market may have more room to strengthen," the trader said.

Iron ore on the Dalian Commodity Exchange ended 2.1 per cent higher at 477 yuan a tonne, after earlier hitting 482.50 yuan, its strongest since March 22.

Also aiding sentiment on iron ore, stockpiles of the commodity at major Chinese ports dropped for a third week in a row.

They stood at 159.78 million tonnes on April 20, from a record high of 161.68 million tonnes at the end of March, SteelHome data showed.

Coke futures jumped as much as 4.3 per cent to 1,940 yuan a tonne, the highest since March 16, before settling at 1,931.50 yuan, up 3.9 per cent. Coking coal increased 2.3 per cent to 1,177.50 yuan.

The city of Handan in Hebei province, one of the most polluted cities in the north, the Shandong Coke Association and the China Coke Association held a meeting last week of about 40 small coke producers based in Hebei and Shandong province, according to a source briefed on the gathering. The source declined to be named due to the sensitivity of the matter.

At the meeting, the factories considered reducing output by at least 15 per cent but did not reach a final agreement, the source added. REUTERS