China Rebar Volumes Gain to Record on Government Spending
The volume of steel reinforcement- bar futures traded on the Shanghai Futures Exchange advanced to a record on speculation that new infrastructure projects in China will increase demand.
A total of 6.01 million lots of the most-active, January delivery contract were traded today, up from 5.9 million lots on Sept. 7, the previous high, bourse data showed. One lot equals 10 metric tons. Futures climbed for a third day, closing 2.7 percent higher at 3,497 yuan ($551) a ton as open interest rose 15,028 lots to 1.38 million lots.
China, the world’s largest steel producer, has been ramping up infrastructure spending to counter a slowdown in economic growth that’s on course for the weakest annual pace in more than two decades. The government approved plans for 2,018 kilometers (1,254 miles) of roads last week, as well as sewage plants, port and warehouse projects and subways. The price of reinforcement bars, known as rebars, has lost 17 percent this year.
Given the infrastructure plans, as well as output cuts, investors think it’s time for prices to bottom out, said Huang Huiwen, an analyst at Shanghai CIFCO Futures Co. A rally in China’s stocks also had a so-called spillover effect, she said.
Daily steel production in China dropped in July to 1.99 million tons from 2 million tons a month earlier, data from the National Bureau of Statistics showed. The government is scheduled to release data for August tomorrow.
1 Trillion Yuan
The planned projects may require investment of about 1 trillion yuan, Moody’s Investors Service said in a report today. Baosteel Group Corp., China’s third-largest steelmaker, is among the companies that will benefit most, Moody’s said. Rebars are used to reinforce cement in construction projects.
China’s imports unexpectedly fell in August, according to data released today, signaling that more stimulus may be needed. Industrial output in China rose the least in three years, figures showed yesterday, a day after President Hu Jintao said that the country’s expansion faces “notable downward pressure.”
The price of iron ore, used to make steel, dropped to $86.70 a dry ton on Sept. 5, the lowest level since 2009, according to data from the Steel Index Ltd., which tracks material with 62 percent iron content delivered to Tianjin.
The Shanghai Composite Index (SHCOMP) rose 0.3 percent to close at 2,134.89, the highest since Aug. 14, amid speculation there will be further steps to boost economic growth. That extended a 3.7 percent jump on Sept. 7, the biggest gain in eight months.
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