Chinese steel prices hit 5-week-high amid demand hopes, supply worries

China’s steel prices hit a five-week-peak on Thursday amid expectations of firmer demand as the government takes steps to support the economy and on concerns that supply could tighten as winter production curbs bite.

The outlook for demand from construction was buoyed as two cities in China relaxed restrictions designed to curb real estate flipping – the latest sign of efforts by local governments to revive flagging property sales.

Meanwhile, China’s central bank on Wednesday rolled out a targeted policy tool to spur lending to small and private firms.

“Policymakers have taken more steps to ease downtrend economic pressure, which would help to further boost market sentiment,” analysts at Huatai Futures said in a note.

Benchmark Shanghai rebar steel prices rose as much as 1.8 percent to 3,492 yuan ($506.09) a tonne, a level last seen on Nov.16. It settled up 1.5 percent at 3,481 yuan.

Expectations of tighter supply also helped drive up China’s ferrous market, with top steelmaking hub Hebei forecasting that smog will blanket the region from Dec. 20 to Dec. 24.

At least three cities in Hebei, including provincial capital Shijiazhuang, have ordered industrial plants and miners to limit operations to lower toxic emissions, state-backed national radio reported.

Cities in northern China have recently ordered steel mills to curtail additional output towards year-end as local authorities scramble to meet annual air quality targets.

“Utilisation rates at Chinese steel mills are expected to maintain their downward trend in the coming month … However, steel mills will still have restocking demand as their inventory of raw materials remains at low levels,” analysts from CITIC Futures said in a note in Mandarin.

The most-active iron ore contract on the Dalian Commodity Exchange climbed 1.9 percent to 496.5 yuan a tonne when the market closed at 0700 GMT, just shy of the day’s peak of 497 yuan, its strongest in four weeks.

Coking coal futures fell for a fourth straight day, down 1 percent at 1,191 yuan a tonne after plunging as much as 3.7 percent in the previous session.

Dalian coke prices inched up 0.3 percent to 1,986 yuan.

Source: Reuters