Commodities

China steel futures extend rally on stimulus hopes; iron ore falters

Steel futures in China extended gains on Thursday as market participants hoped Beijing would roll out more measures to stimulate the slowing domestic economy amid fears about a global recession.

By Enrico Dela Cruz

MANILA, Aug 15 (Reuters) - Steel futures in China extended gains on Thursday as market participants hoped Beijing would roll out more measures to stimulate the slowing domestic economy amid fears about a global recession.

Rallying for a fourth straight day, the most-traded October 2019 contract for hot-rolled coil SHHCcv1, used in cars and home appliances, on the Shanghai Futures Exchange ended up 0.7% to 3,722 yuan ($529.78) a tonne, its strongest finish since Aug. 2.

The construction steel rebar index SRBcv1 was up 0.5% at 3,715 yuan a tonne, marking its third session of gains.

Shanghai steel futures managed to push higher on Wednesday despite unexpectedly weak Chinese economic data for July, including a marked slowdown in industrial output growth amid a protracted U.S.-Sino trade war.

"Investors took a glass half full approach to the weak economic data in China, with expectations of extra stimulus measures rising," ANZ Research said in a note.

Support for steel prices is also seen intact as some Chinese steelmakers have decided to reduce their output to prop up weak prices and thus boost profit margins squeezed by high costs of raw materials.

Iron ore prices retreated, with the Dalian Commodity Exchange benchmark falling as much as 3.5% while futures in Singapore dropped as much as 2.4% on downbeat Chinese demand prospects for the raw material and rising port stockpiles.

FUNDAMENTALS

* The most-active Dalian iron ore contract DCIOcv1, with January 2020 expiry, ended down 2.8% at 618 yuan a tonne, after hitting its lowest in more than two months earlier in the session.

* In Singapore, the most-active September 2019 iron ore contract was down 2.2% at $86.40 a tonne.

* Iron ore prices have cooled, as a supply squeeze fades but a hoped-for Chinese boost to demand remains elusive, according to Reuters Breakingviews columnist Clara Ferreira-Marques.

* Benchmark spot 62% iron ore for delivery to China, as assessed by SteelHome consultancy SH-CCN-IRNOR62, settled at $91.50 a tonne on Wednesday, rebounding from its lowest in more than four months, hit early this week.

* Other steel ingredients were mixed, with Dalian coking coal DJMcv1 up 0.2% at 1,328 yuan a tonne, but coke DCJcv1 edged down 0.4% to 1,981.50 yuan.

* For the top stories metals and other news, click TOP/MTL or MET/L

($1 = 7.0256 yuan)

Dalian iron ore vs Shanghai steel futureshttps://tmsnrt.rs/2YOx3hZ

(Reporting by Enrico dela Cruz; Editing by Shounak Dasgupta and Sherry Jacob-Phillips)

((enrico.delacruz@tr.com; +632 841-8934; Reuters Messaging: enrico.delacruz.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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