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  1. Shanghai steel rallies 5 per cent as China moves to consolidate sector

Shanghai steel rallies 5 per cent as China moves to consolidate sector

Shanghai steel futures climbed more than 5 per cent on Monday, touching a seven-week high, propped up by China's efforts...

By: | Manila | Published: June 27, 2016 10:58 AM
steel The announcement came as China’s top economic planner said the country is aiming to cut its steel production capacity by 45 million tonnes this year. (Representational Image: Reuters)

Shanghai steel futures climbed more than 5 per cent on Monday, touching a seven-week high, propped up by China’s efforts to consolidate the sector to improve efficiency amid global calls for Beijing to cut its excess capacity.

China’s Baosteel Group and Wuhan Iron and Steel Group, the country’s No.2 and No. 4 steelmakers are planning to restructure their businesses, but did not give details in separate stock exchange filings on Sunday.

Also Read: China steel, iron ore slip deeper into bear territory as exchanges keep up pressure

The announcement came as China’s top economic planner said the country is aiming to cut its steel production capacity by 45 million tonnes this year.

“This gives people hope that the industry will be better going forward as the government undertakes supply-side reforms,” said Wang Di, analyst at CRU consultancy in Beijing. “Profits of steelmakers will be more sustainable.”

The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange was up 5.3 percent at 2,253 yuan ($339) a tonne, after rising as far as 2,263 yuan, its strongest since May 9.

Riding on steel’s strength, raw material iron ore on the Dalian Commodity Exchange rose nearly 6 percent to touch the exchange-set ceiling of 411 yuan a tonne.

From the United States to Europe and Asia, many countries have slapped anti-dumping duties on Chinese steel exports that have hurt their domestic steelmakers. China in February vowed to cut its steel capacity by 100-150 million tonnes over the next five years.

Other analysts say the sharp gains in ferrous futures on Monday reflected investors’ perception that steel demand is stronger than thought.

“Investors are betting that the market is stronger than expected. Even if the physical prices look softer, inventories both owned by steel mills and social warehouses are not piling up, suggesting underlying demand remains firm,” said Wu Wei, an analyst at Yongan Futures in Hangzhou in China’s eastern Zhejiang province.

Other steel and steelmaking commodities also raced higher. Hot-rolled coil in Shanghai jumped 5.2 percent to 2,429 yuan a tonne and Dalian coke surged 5.6 percent to 903 yuan.

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