China steel steady amid positive outlook, iron ore firm

Posted on 20 September 2017

Source: Reuters

Chinese steel and iron ore futures steadied on Tuesday after a three-day decline, underpinned by expectations that steel prices will be supported by planned production cuts in the country during winter to fight smog.

Major industrial zones in China, including top steel producer Hebei province, have been ordered to curb output by up to half from November through March.

A firm outlook for China’s property sector also bodes well for steel demand, said Argonaut Securities analyst Helen Lau, citing sustained property price increases in smaller Chinese cities.

“Together with production cuts during the winter season, we expect steel prices to rise further through the fourth quarter,” Lau said in a note.

The most-active rebar on the Shanghai Futures Exchange was little changed at 3,786 yuan ($575) a tonne by midday.

Iron ore on the Dalian Commodity Exchange was up 0.1 percent at 505.50 yuan per tonne.

Data released on Monday showed new home prices in Tier-3 Chinese cities rose a faster-than-average 0.4 percent in August.

Guilin, a smaller Tier-3 city in southern China’s Guangxi Zhuang Autonomous Region, was the top price performer in August, rising 1.1 percent. But a potential risk to Chinese steel demand in winter is Beijing’s weekend announcement that it will suspend construction of major public projects during winter to improve the capital’s air quality.

Construction of road and water projects, as well as demolition of housing, will be banned from Nov. 15 to March 15 within the city’s six major districts and surrounding suburbs, the official Xinhua News agency reported on Sunday. Iron ore for delivery to China’s Qingdao port eased 0.5 percent to $71.76 a tonne on Monday, the lowest since July 28, according to Metal Bulletin, tracking losses in Chinese futures in the previous session. 

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