The sharp slump in prices since the end of August - more than 6 percent - has caused some steel companies to lose money.
Chinese steel futures rose on Tuesday on expectations that demand in the world’s biggest producer and consumer would pick up before a weeklong holiday in early October, helping to lift prices for key raw material iron ore as well.
End-users of steel – such as construction companies – are expected to pick up restocking ahead of a national holiday between Oct. 1-7, and that is expected to support a technical recovery from the three-month low hit on Monday.
The sharp slump in prices since the end of August – more than 6 percent – has caused some steel companies to lose money.
“Steel prices have slumped to below production costs for some mills so this can’t last, while there is also hope for pre-holiday restocking,” said Xia Junyan, an investment manager of Hangzhou CIEC Trading Co in Shanghai.
The most-traded rebar on the Shanghai Futures Exchange rose 1.4 percent to 2,267 yuan ($339.92) a tonne by 0310 GMT. The construction steel product dropped to a session low of 2,190 yuan ($328) on Monday, the weakest since June 29.
Steel demand typically improves in the autumn season of the Northern Hemisphere as construction activities – the main consumer of the metal – pick up after a summer slowdown.
However, the autumn recovery has appeared more slowly than expected this year.
Iron ore was trending higher as steel mills were replenishing stocks of the raw material. Iron ore on the Dalian Commodity Exchange rose 2.1 percent to 398 yuan a tonne by 0310 GMT.
Iron ore for delivery to China’s Tianjin port <.IO62-CNI=SI> edged down 20 cents to $55.3 a tonne on Monday, according to The Steel Index. ($1 = 6.6692 Chinese yuan)