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China’s steel, iron ore rebound on restocking demand

China’s steel and iron ore prices rose on Tuesday, supported by expectations that many halted construction activities in the country will resume and new ones will kick off soon, boosting restocking demand for the commodities.

The most-active construction steel rebar contract on the Shanghai Futures Exchange climbed as much as 2.5 percent to hit 3,820 yuan ($568.88) a tonne, before ending the session at 3,815 yuan to post its biggest daily gain in four weeks.

Hot rolled coil ended 2.4 percent higher at 3,776 yuan a tonne.

“Steel prices should rise after we saw less output last week, and with demand expected to improve, especially in the construction sites, because the weather is getting better,” said analyst Richard Lu of CRU in Beijing.

“Demand for steel flat products has been particularly robust now maybe because of some restocking, as inventories have fallen,” he said.

The benchmark rebar contract dropped 10 percent since hitting a five-month closing peak of 3,856 yuan on Feb. 11, with China’s slowing economic growth amid a trade war with the United States clouding the outlook for its steel demand.

The most-traded iron ore contract on the Dalian Commodity Exchange jumped 1.9 percent to 612.5 yuan a tonne.

Iron ore prices in Dalian have been volatile since hitting a record intraday high of 657.5 yuan a tonne on Feb. 12, lifted by concerns about supply disruptions in the wake of top miner Vale SA’s tailings dam disaster in January.

High prices and restrictions on China’s steel production aimed at tackling air pollution were seen dampening demand for iron ore recently, while inventories at Chinese ports continued to rise.

“It’s been debates about the prospects of Chinese steel demand that have kept investors cautious,” ANZ said in a note. “That places a big emphasis on data later this week, including fixed asset investment and industrial output.”

Dalian iron ore’s gains on Tuesday also followed news that the town of Mangaratiba, in Brazil’s Rio de Janeiro state, fined Vale and closed its Ilha da Guaiba port terminal for the second time this year.

Around 40 million tonnes of iron ore go through Vale’s Ilha da Guaiba terminal yearly, according to Brazil’s port regulator. The terminal was ordered to be closed on Monday due to pollution problems and the alleged lack of an operating license.

Dalian coke snapped a five-day decline to gain 0.7 percent at 2,005 yuan a tonne. However, coking coal extended its drop into a seven straight session, edging down 0.3 percent to 1,228 yuan.

Source: Reuters

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