Shanghai steel prices jumped for a second straight day on Thursday, buoyed by expectations that China could launch more infrastructure projects next year which could boost demand in the world’s top steel consumer.
The Chinese government has tweaked its priorities to focus more on infrastructure, exports and fighting water pollution while slowing efforts to reduce capacity in coal and steel industries, state media reported on Wednesday.
In its guidance to local governments and authorities, the State Council, or cabinet, said new infrastructure should focus on construction of roads and waterways.
“There is this expectation of Chinese government stimulating more growth in 2019 just after the Chinese New Year,” said Darren Toh, steel and iron ore data scientist at Tivlon Technologies, a Singapore-based steel and iron ore data analytics company.
The Lunar New Year falls in early February.
The most-active rebar contract on the Shanghai Futures Exchange closed up 2.1 percent at 3,419 yuan a tonne. Hot rolled coil surged 4.2 percent to settle at 3,470 yuan, after hitting a six-week high of 3,485 yuan earlier in the session.
Slower steel demand as construction projects in China are halted because of the cold weather weighed on steel prices in recent weeks.
The price of construction steel product rebar is still down 15 percent from a seven-year peak reached in late August.
“The market is pricing in a little bit of positivity on demand moving forward,” Toh said. “I think it’s pretty sustainable.”
Steel’s strength also lifted prices of steelmaking raw materials, with coke on the Dalian Commodity Exchange up 1.9 percent at 2,019 yuan a tonne and coking coal jumping 3.4 percent to 1,245 yuan.
The most-traded May iron ore gained 0.4 percent to 478.50 yuan a tonne.
Spot iron ore for delivery to China SH-CCN-IRNOR62 rose 0.9 percent to $67 a tonne on Wednesday, according to SteelHome consultancy.
Source: Reuters (Reporting by Enrico dela Cruz Editing by Manolo Serapio Jr., Amrutha Gayathri and Rashmi Aich)