Shanghai steel futures hit their highest in nearly two months on Monday (March 16) on signs of a recovery in demand, but ended well off the day's peaks after China released grim industrial output data.
Construction steel rebar on the Shanghai Futures Exchange (ShFE) closed 1.2% higher at 3,553 yuan/t ($507.56/t), after hitting 3,584 yuan/t earlier in the session, the highest since January 21.
Hot-rolled steel coil, used in cars and home appliances, climbed 0.6% to 3,506 yuan/t, after scaling the highest since January 23 at 3,551 yuan/t. Stainless steel gained 0.9%.
Sentiment across Chinese ferrous complex was generally upbeat, with steelmaking raw material iron ore also supported by supply concerns.
"With workers slowly returning to worksites (in China), there are growing expectations that steel mills will need to restock raw materials," said ANZ senior commodity strategist Daniel Hynes.
"And while total steel inventories climbed higher last week, stockpiles of rebar actually fell for the first time in several weeks," he said in a note, highlighting rising rebar prices.
Chinese steel stocks hit a record-high 38.91 million tonnes last week, but the weekly rise was the slowest since December 20, data showed. Inventories at mills dropped by 600,000 tonnes to 12.9 million tonnes.
Industrial output in China, hit hard by the coronavirus outbreak, fell by 13.5% in January-February from the same period a year earlier, the weakest reading since January 1990 when Reuters records started.
Policymakers have rolled out further measures to cushion global economies reeling from the coronavirus pandemic, with the U.S. Federal Reserve slashing interest rates on Sunday and China cutting the reserve requirement ratio on Friday.
China accounts for more than half of the world's steel output and is the biggest exporter of the material widely used for manufacturing and construction.
(Writing by Emma Yang Editing by Tammy Yang)
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