Easing Sino-US tension cheers China’s ferrous futures
On the Shanghai Futures Exchange (SHFE), the most-traded rebar futures contract for May delivery bounced 1.8% during the morning trading session to Yuan 3,327/tonne ($478/t), whereas the most active contracts for iron ore and coke for January delivery on the Dalian Commodity Exchange rebounded more substantially, jumping by 5.4% and 4.1% and closing the morning trading at Yuan 2,238/t and Yuan 498.5/t respectively, Mysteel noted.
Attending the G-20 summit in Argentina over the weekend, Chinese President Xi Jinping and the US President Donald Trump agreed not to impose new additional tariffs from next January 1 but to maintain import duties on each other’s commodities at 10% on certain terms and conditions, China’s Xinhua News Agency reported.
“Signs of a de-escalation in the trade war are a tonic to faltering (ferrous) market confidence. Previously, market participants were spooked by the impending tariffs, as well as a weaker economic growth in general under the (trade war’s) influence,” commented an analyst with a Shanghai-based futures company.
However, the positive impact of the news on markets may be short-lived, he cautioned. “The near-term development of the ferrous paper market will still rely on the fundamentals of the commodities themselves. For rebar contracts, high production remains a big concern,” he warned, indicating the weakness in SHFE futures may re-emerge after this present spurt of optimism fades.
On Friday, the day before the Xi-Trump meeting, rebar futures on the SHFE closed the afternoon session at Yuan 3,256/t, marking a hefty Yuan 916/t decline on month.
On Mysteel’s most recent output data, rebar production over November 22-28 remained largely stable from the previous week at 3.39 million tonnes, but this was 13% higher on year, according to the latest survey published on November 30. More worrying, rebar inventories at mills had increased for fourth consecutive weeks as of November 28 to reach 2.08 million tonnes, a huge 37% increase on year.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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