ACCOUNT PROFILE

Improving steel margins lift ferrous metal prices in China

Posted on 09 March 2021

Chinese steel futures rose on Monday as improving profit margins in the world’s top producer of the manufacturing and construction material buoyed sentiment, helping lift prices of key ingredient iron ore as well.

May construction steel rebar on the Shanghai Futures Exchange SRBcv1 climbed 1.6% to 4,793 yuan ($736.82) a tonne by 0330 GMT.

May hot-rolled coil SHHCcv1 , steel used in household appliances and car bodies, was up 2.3% at 4,995 yuan a tonne, after earlier rising to 5,038 yuan, near a record peak of 5,088 yuan hit on March 3.

“The strong performance of finished product prices has caused the profitability of steel mills to rebound,” analysts at Sinosteel Futures said in a note.

A recent decline in crude steel output and an expected boost in Chinese demand this month, after the Lunar New Year holidays in February, have pushed prices higher, they said.

“Data last Friday showed that the profitability of 247 steel mills nationwide was 90.04%, an increase of 4.33 percentage points from the previous week and a year-on-year increase of 3.46 percentage points,” Sinosteel analysts said.

FUNDAMENTALS

* Iron ore futures climbed 0.9% on the Dalian Commodity Exchange DCIOcv1 and 0.8% on the Singapore Exchange SZZFJ1 .

* “Positive steel mill margins and stronger demand for exports should keep China’s iron ore import demand elevated,” commodity strategists at ANZ said in a note.

* China’s iron ore imports rose 2.8% for the first two months of 2021 from a year earlier. Spot prices of iron ore in China rallied to multi-year highs last week, with the benchmark 62% iron-content material hitting a peak of $179.50 a tonne, according to SteelHome consultancy. SH-CCN-IRNOR62

* Shanghai stainless steel SHSScv1 rose 1.3%, recovering after last week’s market shock when prices of raw material nickel tumbled. Dalian coking coal DJMcv1 jumped 2.7%, while coke DCJcv1 slumped 2.2%.

Source : Reuters