Chinese steel rises in price amid strong demand

Iron ore futures in China rose nearly 4 percent on Friday, along with steel prices, as investors looked to strong demand for steel from manufacturers and construction projects.

The official purchasing managers' index (PMI) fell to 49.2 in February from 49.5 in the previous month, official data showed, but total new orders - an indication of future activity - have returned to expansionary territory, suggesting some improvement in domestic demand.

“More new orders indicate that demand from the manufacturing sector is stabilizing. Meanwhile, the construction of new infrastructure projects is expected to begin, which will further strengthen the foundations of the steel market, ”CITIC Futures analysts said in a note in Mandarin.

The market also expects Chinese leaders to offer many assurances in parliament next week that Beijing will do more to fight small businesses, boost demand and keep jobs.

Underlying prices for construction rebar on the Shanghai Futures Exchange rose 2.2 percent to 3815 yuan ($ 569.28) a tonne.

Hot rolled steel, long products production, rose 2.1 percent to 3825 yuan.

Total steel stocks from Chinese traders are up 695,600 tonnes this week from March 1 to 18.67 million tonnes, according to data compiled by consulting company Mysteel, indicating that traders are actively buying from factories in anticipation of strong demand. processing.

Rebar stocks of construction products at traders increased 6.8 percent to 10.19 million tonnes this week, while inventories of hot rolled steel rose 0.3 percent to 2.75 million tonnes.

Steel prices also rose on Friday on expectations that steel mills will seek to replenish inventories.

The most active iron ore futures closed 3.7 percent higher at 625.5 yuan a tonne.

The coking coal contract rose 1.6 percent to 1,313.5 yuan a tonne, while coke futures rose 2.3 percent to 2,168 yuan.

Mysteel data showed that weekly capacity utilization at steel mills across the country was steady at 65.75% this week as of March 1.

On Friday, China's main steel city Tangshan issued a level 1 smog warning, the highest in the country's four-level pollution warning system.

Steel mills in the city will have to cut production by 40 to 70 percent or even halt production during the alert, which goes into effect from March 1 to March 6.