MANILA: Chinese rebar steel futures hit their highest in more than nine years on Wednesday, buoyed by strong spot steel demand and prices, and falling domestic inventory of the construction material.
The Shanghai Futures Exchange's (ShFE) most-traded October rebar contract rose as much as 1.5% to 3,663 yuan ($515.33) a tonne, its highest since February 2011, before closing up 0.7%.
Rebar stockpiles in China were estimated to have fallen by 40% since mid-March, indicating a solid recovery in demand, after the world's second-largest economy eased its coronavirus-fuelled lockdown restrictions, according to SteelHome consultancy data.
Construction is leading a gradual recovery of China's economy, helping improve steel profit margins and encouraging mills to ramp up output.
“We continue to be bullish on short-term demand," said Hui Heng Tan, a Singapore-based analyst at Marex Spectron.
Strong spot steel demand in China is expected to continue, “as our forward demand indicator too reflects conditions to remain firm in the next 2-3 weeks", he said in a note.
Marex Spectron is also bullish on its assessment of short-term macroeconomic conditions in China, he said, citing looser credit conditions in particular.
ShFE's hot-rolled coil fell 1.0%, after a four-day advance, while stainless steel finished flat.
Iron ore on the Dalian Commodity Exchange rose 0.4% after trading in a narrow range earlier. The move added to a rally fuelled by a buoyant Chinese demand outlook and concerns over supply from Brazil.
Brazil's Vale SA expects its iron ore shipments to China to rise in 2020 versus 2019 due to falling demand in other coronavirus-hit countries, according to the China Iron and Steel Association following a phone call with the miner.