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Shanghai rebar hits 3-1/2-month high on firm demand, spurs iron ore

service@ironoreteam.comMon Jul 3, 2017 12:49pm GMT

Chinese steel futures on Monday climbed more than 3 percent to their highest since March, supported by firm demand in the world's top producer and data showing a recovery in China's manufacturing activity.

China's manufacturing sector cranked back into growth mode in June, expanding at the fastest pace in three months after unexpectedly contracting in May, as new orders and production rose, a private survey showed.

"The comment from our steel mill clients is they have quite a lot of demand and got a lot of orders in hand," said an iron ore trader in Shanghai. "They're quite comfortable selling their cargo at a good price."

The most-active rebar on the Shanghai Futures Exchange closed up 3.2 percent at 3,413 yuan ($503) a tonne, not far from its session peak of 3,415 yuan, the highest since March 16.

Powered by China's infrastructure push, Chinese construction steel producers are seeing their best profits in years, prompting them to boost output as prices rise. This year, rebar futures have gained almost 27 percent.

Increased steel margins have spurred mills' appetite for raw material iron ore, with spot iron ore prices rising 13.9 percent in June, the biggest increase for that month since 2009.

"We continue to see the iron ore rally gaining momentum in the short run as Chinese steel mill margins continue to remain elevated," Commonwealth Bank of Australia said in a note.

The most-traded iron ore on the Dalian Commodity Exchange rose 3.4 percent to end at 487 yuan a tonne, just shy of the intraday peak of 488 yuan, its loftiest since May 23.