China steel surges on seasonal demand, iron ore hits record high

[MANILA] China's steel futures on Monday gained more than 3 per cent on a seasonal upturn in demand, lending support to prices for steelmaking raw materials, including iron ore, which extended a record-breaking rally.

The most active construction steel rebar contract on the Shanghai Futures Exchange rose as much as 3.6 per cent to 3,710 yuan (US$552.40) a tonne, its highest since August 22.

Hot rolled coil, used for cars and home appliances, jumped as much as 3.4 per cent to 3,955 yuan a tonne.

"The physical prices of steel have also increased over the last few days, driven by the seasonal demand improvement," said Richard Lu, senior analyst at CRU Group's Beijing office.

China steel demand typically picks up at the end of the winter, with April usually the peak month as industrial and other activity starts back up as temperatures warm.

Demand has also risen as construction activities have picked up, and there is also buying as China is set to roll out more infrastructure projects, Lu said.

With steel mills resuming production to rebuild stocks and fill buy orders, demand for steelmaking ingredients such as iron ore and coking coal has also improved.

The most traded May 2019 iron ore contract on the Dalian Commodity Exchange soared as much as 4.1 per cent to 710.5 yuan a tonne, highest for the Asian benchmark since 2013, when the futures contract was launched.

The iron ore contract gained nearly 10 per cent last week, its best performance since the last week of January, as declining shipments from Brazil and Australia amid higher demand from Chinese steel mills tightened supply.

Iron ore shipments to China from Australia's Port Hedland terminal, the world's biggest iron ore port, fell more than 8 per cent in March from a month earlier, port data released on Friday showed.

Spot 62-per cent grade iron ore for delivery to China rose 1.6 per cent on Thursday last week to US$93 a tonne, before a three-day weekend for China's financial markets, according to SteelHome consultancy.

Coking coal on Monday rose as much as 1.2 per cent to 1,260.5 yuan a tonne, and coke climbed 1.7 per cent to 2,054.5 yuan.

(US$1 = 6.7165 yuan)

REUTERS