China’s construction steel futures rose 2 percent to a 12-week high on Friday, on track for their best week since early December on the back of restocking demand ahead of a week-long national holiday.
Inventory of steel products held by Chinese traders rose 672,400 tonnes as of Jan. 25 to 9.91 million tonnes, with rebar stocks up 11.9 percent and wire-rod stocks up 13.8 percent, data tracked by Mysteel consultancy showed.
Steel traders in China typically replenish their inventory ahead of the Lunar New Year holiday, which starts this year on Feb. 4, and sell them off when downstream users – especially construction sites – restart activities in the spring.
This year, traders have been reluctant to boost their stocks in recent weeks due to economic uncertainties, but the latest increase in stockpiles indicates more confidence about post-holiday demand from downstream sectors.
“Growth rates for inventory replenishment get closer to the pace during same period last year … But demand will further shrink as this holiday season is getting closer,” said analysts from Huatai Futures in a note.
Benchmark Shanghai rebar prices were trading up 1.9 percent at 3,728 yuan ($549.18) a tonne as of 0220 GMT. Rebar hit a peak as 3,737 yuan a tonne when the market opened and is up 3.6 percent so far this week, on track for its strongest week since Dec.7.
Hot-rolled coil futures were up 1.7 percent to 3,636 yuan a tonne.
Price hikes for steel helped to support steelmaking raw materials, as investors expect steel mills to ramp up output alongside firm steel prices.
Weekly utilisation rates at steel mills across the country picked up for a third straight week to 65.47 percent, up from 64.92 percent last week, according to data compiled by Mysteel.
The most-active iron ore futures on the Dalian Commodity Exchange rose 0.9 percent to 537 yuan a tonne.
Dalian coking coal edged up 0.1 percent to 1,227 yuan, while coke contract for May delivery climbed 1.1 percent to 2,063 yuan.
Yaang Pipe Industry Co., Limited (www.yaang.com)