Steel futures at SHFE post record gains in pre holiday period

Wednesday, 26 Jan 2011
Bloomberg reported that steel futures in Shanghai jumped to a record with buyers in China stockpiling the raw material in anticipation of a shortfall in supplies.
Rebars futures, on the Shanghai Futures Exchange, for October delivery gained for a third day rising as much as by 2.6% to CNY 5,093 per tonne, the highest ever. The contract was at CNY 5,077 per tonne at the 11:30 AM break, up by 5.5% this month.
The May delivery wire rod contract rose by 2.7% to CNY 4,909 per tonne.
Rebar inventories monitored by the Shanghai Futures Exchange fell to 17,259 tonnes last week, the lowest since August 2009.

Mr Huang Huiwen analyst with China International Futures (Shanghai) Co said “Raw material prices continue to support steel prices. Iron ore supplies may further tighten as Chinese steel demand and production picks up.”
He said “The strength in raw material prices should ensure the continued upward momentum of steel prices.”
But Mr Huang cautioned that “The biggest risk to the market lies in China’s moves to rein in liquidity and property speculation.”

China’s central bank on Jan. 14 ordered lenders to hold more deposits as reserves for the fourth time in two months, adding to last year’s policy tightening measures by the government that included two interest-rate increases. Other steps since April include curbing loans for third-home purchases, increasing down-payment requirements and raising mortgage rates.
China boosted steel output by 9.3% to a record in 2010 to reach about 627 million tonnes and as per some analysts would rise to 661 million tonnes in 2011. (sourced:Bloomberg)