Futures for Chinese steel fell on Friday due to concerns over oversupply amid rising utilization rates at factories, but they still showed a weekly increase, while iron ore was slightly below the record high.
Metallurgists in China are increasing their production to earn a steady profit, despite increased environmental measures in major steel centers.
The utilization rates at steel mills rose by 2.07 percentage points in the week to May 24 from 71.13% a week earlier, data collected by consulting company Mysteel showed. These were the highest levels since mid-July.
“With the growth of steel production, traders began to accelerate the reduction of stocks amid fears of glut and lower demand,” analysts at Jinrui Futures say.
Base prices for rebar for construction rebar fell 1.9% overnight to 3,826 yuan ($ 554.04) per ton, but fell by only 0.3% to 3,889 yuan, reaching a 2.4-percent weekly increase. Hot-rolled futures fell 0.2 percent to 3,726 yuan on Friday.
According to Mysteel, stocks of steel products of Chinese traders this week continued to fall, decreasing by 514,800 tons to 11.62 million tons.
The demand for steel in China tends to weaken in summer, as high temperatures and rain impede construction activities.
Meanwhile, Dalian iron ore rose on the third day and closed with an increase of 0.3% to 732 yuan per ton, a little embarrassed by the record high of 735 yuan reached on Thursday. Over the week, it grew by 4.6%.
Among other steelmaking ingredients, coking coal and coke showed a strong increase of 2.3% after a brief price correction on Thursday.
“(We expect coking coal prices) will remain elevated, given the high demand from the Chinese steel sector due to deteriorating US-China relations and an increase in the likelihood of further economic support from the government to a slowing Chinese economy,” Fitch analysts say. Solutions Macro Research
