Shanghai rebar up after Bernanke comments, but gains seen short-lived

SINGAPORE, Nov 20:  Shanghai rebar futures rose for a second session today, spurred by technical buying after prices slipped to three-week lows and comments from Federal Reserve Chairman Ben Bernanke boosting hopes that the U.S. Monetary stimulus will continue.
The gains in Chinese steel prices were unlikely to be sustained as a slow decline in traders’ stockpiles points to sluggish demand in the world’s top consumer, analysts said.
The most-active May rebar contract on the Shanghai Futures Exchange was up 1.1 percent at 600 dollar a tonne by midday, after rising to as high as 3,651 yuan earlier.
Technically, the price has found some support after recent losses, said Zhou Ting, analyst at Jinrui Futures in Shenzhen. Rebar touched 3,583 yuan on Monday, its weakest since Oct. 29.
‘Sentiment is also being aided by Bernanke’s comments in favour of stimulus. But fundamentally there’s nothing very positive that can sustain the price,’ said Zhou, who sees resistance at 3,700 yuan.
Iron ore for May delivery at the Dalian Commodity Exchange was up half a percent at 941 yuan a tonne, tracking gains in rebar. The price fell to a two-week trough of 925 yuan on Monday.
Bernanke said the Fed will keep its ultra-easy monetary policy for as long as needed, which could mean holding interest rates near zero until ‘well after’ US unemployment falls under 6.5 per cent.
Traders’ inventories of five major steel products in China stood at 13.5 million tonnes as of Nov. 15, down slightly from 13.6 million tonnes in the previous week, industry data showed. Stockpiles of rebar dipped to 5.26 million tonnes from 5.31 million tonnes.
While demand was slow, Chinese steel production has remained strong. Crude steel output averaged 2.144 million tonnes in the first 10 days of November, up 2.2 per cent from October 21-31, the China Iron and Steel Association said earlier this week.
‘As we begin to see some signs of sluggish demand for iron ore and a recent weaker trend in coking coal, there appears to be an imbalance emerging in China’s steel output and underlying steel demand,’ Australia and New Zealand Banking Group said in a note.
‘We would expect a correction in the steel supply/demand equation at some point to create some downside risk for inputs, in particular iron ore.’
Iron ore for immediate delivery in China’s Tianjin port <.IO62-CNI=SI> fell 0.5 per cent to $136.30 a tonne yesterday, according to data provider Steel Index, snapping a four-day rise.
Spot iron ore prices are down 14 percent from this year’s peak and have traded in an extremely tight range between $135 and $137 since the start of November.
‘There’s still some buying interest but mills are looking for lower prices and not very big volumes. I think both mills and miners are happy to see prices being maintained around current levels because both of them can still make money,’ said an iron ore trader in Shanghai. Shanghai rebar futures and iron ore indexes at 0339 GMT Contract                          Last    Change   Pct Change
SHFE REBAR MAY4                   3645    +41.00        +1.14
DALIAN IRON ORE MAY4               941     +5.00        +0.53
THE STEEL INDEX 62 PCT INDEX     136.3     -0.70        -0.51
METAL BULLETIN INDEX            137.83     +1.60        +1.17
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.0927 Chinese yuan)


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