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China steel futures extend gains on demand hopes

Chinese steel futures rose for the second day on Thursday on hopes that demand will improve as Beijing allows more private investment in various sectors.

China will allow private investment in 80 projects spanning the energy, information and infrastructure sectors, Premier Li Keqiang said on Wednesday, as part of plans to reduce state intervention and let market forces play a bigger role in the world’s second-biggest economy.

“Li’s remarks have offered the market some confidence that steel demand will be supported as investors were earlier concerned that steel-consuming sectors are losing momentum quickly,” said a rebar futures broker in Shanghai.

Demand also typically improves in the second quarter as construction and manufacturing activity picks up in warmer months.

The most active rebar futures on the Shanghai Futures Exchange, for October delivery, jumped 1.3 percent higher to close at 3,283 yuan ($530) a tonne.

But China will not use forceful stimulus measures to fight any short-term dips in economic growth, reiterating the government’s official stance on macro-economic policies.

The gains in steel prices have supported steelmaking raw material iron ore, which also extended gains into a second session on Thursday.

On the Dalian Commodity Exchange, the benchmark iron ore contract, for September settlement, had surged 2.1 percent to 794 yuan a tonne by close.

“Spot steel market prices have steadied since mid-week so mills are increasing buying of iron ore, though prices are still a bit lower from last week,” said an iron ore official with a northern Chinese steel mill.

Two cargoes of 100,000 tonnes of Australian iron ore fines of 62-percent grade were sold at $113 a tonne, for delivery to China in June, up $1 from Wednesday, traders said.

Another three cargoes of similar grades were sold at a $1.5 premium on indices.

Iron ore for immediate delivery to China .IO62-CNI=SI dropped further by 0.3 percent to $112.2 a tonne on Wednesday, its lowest since March 26, according to data provider Steel Index. It has fallen more than 16 percent this year.
Source: Reuters (Editing by Joseph Radford and Anand Basu)