SHANGHAI, May 6: Shanghai steel futures rose more than 1 percent on Monday, tracking a broad rally in commodities markets fueled by strong US employment data, though concerns about steel demand in top user China persisted.
A fragile recovery in China’s economy is expected to curb steel demand growth in the world’s biggest steel producer, with high output adding to concerns on prices and weighing on raw material iron ore.
‘There is no strong anticipation of solid recovery in China’s economy in the second quarter, and the overall steel market fundamentals remain weak, so I would expect not much upside for steel prices,’ said Ding Rui, an analyst with Zhongcai Futures in Shanghai.
The most active rebar futures for October delivery on the Shanghai Futures Exchange climbed 1.4 percent to 3,628 yuan ($590) a tonne by the midday break, still not far from a near 8-month low of 3,530 yuan hit on Thursday.
Growth in China’s services sector, as measured by the HSBC Services Purchasing Managers’ Index, slowed sharply in April to its lowest point of 51.1 since August 2011, fresh evidence that economic revival will remain modest and may be facing wider risks.
With few signs of a rapid recovery in steel demand in the near future and limited buying of spot cargoes from mills, iron ore prices hit near five-month lows on Friday, the biggest weekly fall in seven weeks and also the third straight weekly drop.
Benchmark 62 percent grade iron ore <.IO62-CNI=SI> sagged 1 percent to $128.1 a tonne on Friday, according to data provider Steel Index.
‘I would expect another down week for iron ore as it looks like steel demand will not improve largely in near term,’ said an iron ore trader in Shanghai.
Iron ore inventories at main Chinese ports were 68.16 million tonnes on May 3, up 130,000 tonnes from the previous week, data from industry website Mysteel showed.
The easing of tight iron ore supply from Australia is also likely to weigh on prices.
Exports of iron ore to China from Australia’s Port Hedland, used by BHP Billiton , Fortescue Metals Group and Atlas Iron, climbed 1 percent to 19.3 million tonnes in April from March.
U.S. Nonfarm payrolls rose by 165,000 in April, hiring was much stronger in the past two months than initially reported and the jobless rate fell to a more than four-year low of 7.5 percent.
(agencies)
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