Shanghai steel futures gained for a third straight session on Thursday, backed by expectations that traders may rebuild low stockpiles as demand picks up momentum along with the economy.
Stocks of steel products held by Chinese traders dropped to 13.4 million tonnes last week, an 18th consecutive week of falls, according to data compiled by industry consultancy Umetal. But the pace of decline has slowed to 0.2 percent from 0.9 percent the previous week, Umetal said.
“Some steel traders are starting to buy a little bit because their inventory levels are low. And there’s some hope that the economy is doing better,” said a trader in Shanghai.
“But I don’t expect them to have the capacity to restock like before given that credit access is still relatively tight.”
The most-traded rebar contract for January 2015 delivery on the Shanghai Futures Exchange was up 0.5 percent at 3,118 yuan ($500) a tonne by midday, after touching a session high of 3,133 yuan earlier.
China’s economic growth quickened in the second quarter from the previous three months, Premier Li Keqiang said on Monday, but stressed that further modest government support measures will still be needed.
The world’s second-largest economy grew 7.4 percent in the first quarter, the slowest pace in six quarters.
China’s exports grew less than expected in June, offering no conclusive evidence yet on whether the economy can stabilise without additional government stimulus measures.
Exports rose 7.2 percent in June from a year earlier against market expectations for an increase of 10.6 percent, government data showed, and officials said China needs to work hard to meet its trade growth target of 7.5 percent this year.
China’s imports of iron ore in June dropped 3.6 percent to 74.57 million tonnes from the previous month, according to customs data.
“I think that’s in line with what we’ve seen before. We’re not seeing an uptick but we’re also not seeing too much of a downward trend either, so they’re still importing tonnes of iron ore even though the price has declined,” said James Wilson, mining analyst at Morgans in Perth.
“I’m comfortable with that figure of 74 million tonnes, it still shows that there’s strong demand for imported ore.”
Spot iron ore prices fell to a 21-month low of $89 a tonne in June amid increased supply. Stocks of imported iron ore at Chinese ports reached a record high 113.7 million tonnes last week, according to SteelHome, which tracks the data. SH-TOT-IRONINV
Prices have since recovered but have remained below $100 a tonne, a level that was breached in mid-May.
Benchmark 62-percent grade iron ore for immediate shipment to China .IO62-CNI=SI was little changed at $96.60 a tonne on Wednesday, according to data compiler Steel Index. It was down 28 percent for the year.
Iron ore for delivery in September on the Dalian Commodity Exchange eased 0.3 percent to 707 yuan per tonne.