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Chinese steel extends gains as materials costs rise

Chinese steel edged up on Friday on a jump in iron ore prices and other material costs, but further gains in the construction metal are likely to be limited on a slow recovery of demand in the world's top consumer.

By: | Shanghai | Published: September 23, 2016 10:45 AM
The shortage in coking coal and coke driven by China's environmental crackdown and battle to tackle overcapacity has also contributed to spiking raw material costs and made it difficult for steel mills to secure supplies.(Reuters) The shortage in coking coal and coke driven by China’s environmental crackdown and battle to tackle overcapacity has also contributed to spiking raw material costs and made it difficult for steel mills to secure supplies. (Reuters)

Chinese steel edged up on Friday on a jump in iron ore prices and other material costs, but further gains in the construction metal are likely to be limited on a slow recovery of demand in the world’s top consumer.

The shortage in coking coal and coke driven by China’s environmental crackdown and battle to tackle overcapacity has also contributed to spiking raw material costs and made it difficult for steel mills to secure supplies.

“About half of the steel mills are reaching the break-even point as coking coal and coke surged too much amid the supply shortage, which to some extent supports rebar prices,” said Bai Jing, an analyst with Galaxy Futures in Beijing.

“Demand remains firm, but we haven’t seen as big a recovery as earlier expected in the summer, so prices are likely to fluctuate within a narrow range.”

The most active rebar futures contract on the Shanghai Futures Exchange rose 0.7 percent at 2,307 yuan ($345.90) a tonne by 0244 GMT. Prices have climbed 36 percent so far this year.

Iron ore futures on the Dalian Commodity Exchange rose 0.5 percent to 411.5 yuan a tonne. The main steelmaking raw material has surged 74 percent since the beginning of this year.

Dalian coking coal futures have gained 63.6 percent so far this year and coke prices have nearly doubled.

Iron ore for delivery to China’s Tianjin port <.IO62-CNI=SI> rose 90 cents, or 1.6 percent, to $56.30 a tonne on Thursday, according to The Steel Index.

($1 = 6.6702 Chinese yuan)

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