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Shanghai rebar hits three-year high on tight supply concerns
Reuters Reuters
Tuesday July 04, 2017 12:46 AM
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* Open interest in rebar futures rises to record
* Annual maintenance at China mills fuels supply worries
By Muyu Xu and Manolo Serapio Jr
BEIJING/MANILA, July 4 (Reuters) - China's rebar futures on Tuesday rose to their highest in more than three years as worries over tighter supply fuelled bullish bets in a market that has already gained 27 percent this year.
"With the beginning of annual equipment maintenance in mills, there are market worries about a supply shortage, especially given the crackdown on low-grade steel," said a Fujian-based trader.
In its bid to fight smog and oversupply in its bloated steel sector, China shut all producers of low-quality steel that use induction furnaces at the end of June.
Authorities will send inspection teams in August to check the outcome of the clampdown to ensure those that had been closed will not resume operations. The most-active rebar on the Shanghai Futures Exchange was up 0.4 percent at 3,385 yuan ($498) a tonne by the mid-day break, after rising as high as 3,448 yuan earlier, its strongest since February 2014. The construction steel product has risen 27 percent this year.
Demand for rebar got a boost from China's infrastructure spending this year, fattening margins among producers. Rebar inventories held by Chinese traders stood at 3.73 million tonnes as of June 30, just above a six-month low hit in early June, data compiled by SteelHome consultancy showed.
As prices have surged, the open interest, or the number of outstanding contracts held by traders, for Shanghai rebar futures has climbed to a record, reaching 5.63 million contracts as of Monday, equivalent to 237 million tonnes.
The strength in rebar lifted iron ore futures on the Dalian Commodity Exchange to a six-week high earlier in the day before retreating.
The contract rose to as high as 493 yuan per tonne, the most since May 23, but was down 1.2 percent at 473 yuan at the mid-day break.
Stocks of imported iron ore at China's ports reached 140.3 million tonnes last week, down 1.15 million tonnes from the previous week's 141.45 million tonnes, which was the highest since 2004, according to data tracked by SteelHome. ($1 = 6.7960 Chinese yuan)
(Reporting by Muyu Xu in Beijing and Manolo Serapio Jr. in Manila; Editing by Chrsitian Schmollinger)