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Shanghai rebar hits 7-1/2 wk high amid restructuring, low inventory

Published 30/06/2016, 01:42 pm
© Reuters.  Shanghai rebar hits 7-1/2 wk high amid restructuring, low inventory

* Dalian iron ore rises to 8-wk peak

* Spot iron ore seen slipping back below $50 in H2 as glut bites

By Manolo Serapio Jr

MANILA, June 30 (Reuters) - Chinese steel futures rose to their highest since early May on Thursday, supported by low stockpiles and Beijing's efforts to consolidate the sector.

The gains spilled into raw material iron ore, with prices on the Dalian exchange hitting an eight-week peak. Higher ferrous futures were in line with the renewed appetite for risky assets as global markets from stocks to commodities regained some calm after last week's shock British vote to exit the European Union. MKTS/GLOB

There is continuing optimism in China's steel sector following news of restructuring plans by leading Chinese steelmakers Baosteel Group 600019.SS and Wuhan Iron and Steel Group 600005.SS .

The news, announced last weekend, spurred hopes that a similar restructuring would happen among other mills "that would be positive for steel prices in the long run", said a Shanghai-based trader.

The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange SRBcv1 was up 3.2 percent at 2,321 yuan ($349) a tonne by 0327 GMT, after rising as far as 2,336 yuan, its strongest since May 9.

China's daily crude steel production between June 10 and June 20 decreased 2 percent year-on-year and 5 percent from a month ago, Argonaut Securities said in a note.

"As a result, steel inventory remains low and the market remains relatively tight, supporting price recovery," the brokerage said.

Tracking steel's gains, the most-active iron ore on the Dalian Commodity Exchange DCIOcv1 was up 1.7 percent at 425 yuan a tonne. It touched 431 yuan earlier, its loftiest since May 5.

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI was unchanged at $53.40 a tonne on Wednesday, according to The Steel Index.

The spot benchmark is forecast to fall back below $50 in the second half of 2016 as more of the bulk commodity hits an oversupplied market, a Reuters poll of 18 analysts showed. raw material is estimated to average $47 a tonne in July-December, putting the 2016 average at $49. The full-year forecast will be up from $47 estimated in a previous poll in December.

For 2017, iron ore is forecast to average $46, up from $45 in the previous poll.

($1 = 6.6435 Chinese yuan)

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