Chinese futures rose higher on Tuesday, buoyed by higher steel production in China from strong domestic construction demand.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, which increased by 1.03% day-on-day to RMB 781 per tonne on Tuesday.
However, the steel rebar contract on the Shanghai Futures Exchange, stayed almost flat and traded slightly down by 0.06% day-on-day to RMB 3,599 per tonne.
Steel output to rise in June
According to the National Bureau of Statistics, China’s production of crude steel hit record-high in May at 92.27 million mt of crude steel, up 4.2% year-on-year.
The uptick was due to rising domestic construction demand as trade participants rushed to make up for lost time in Feb-Mar period.
For June, some trade participants expect steel output to rise further despite heavy rains in southern China that affected demand.
As trade sources expected higher infrastructure demand during the second half of 2020, where real estate sector is expected to rebound sharply.
China to reach record-high steel output in 2020
Commerzbank expects China’s production to exceed by 1 billion mt of crude steel in 2020, supported by the country’s infrastructure stimulus plan.
Previously, the country’s crude steel production reached 996.3 million mt in 2019, up 8.3% year-on-year, but the output level might go higher in 2020 due to robust domestic infrastructure demand.
Steel prices also had been rising in China since early April, while iron ore prices had been hovering above $100/mt CFR China over the past two weeks due to potential supply tightness from Brazil.