China steel prices up but demand uncertain- 28 Nov 10

Spot steel prices in the domestic market recovered this week on falling inventories after rate rise concerns led to a decline last week.

Rebar inched up to 4,540-4,550 yuan per tonne in Shanghai on Thursday, up 2 percent from a week earlier, industry consultancy Mysteel said.

End users have started to pick up materials for winter consumption, and prices have also been supported by falling inventories following a five-day shutdown at a number of rolling mills in the city of Tangshan in the northern province of Hebei.

"Spot market inventories have kept falling for a period, and total non-steel mill inventories have been more than 40 percent lower since the beginning of this year," said Jiang Zhiwei, an analyst with BOC International Futures.

Shanghai rebar futures also jumped this week, which analysts attributed to a technical rebound in line with the spot market.

"We don''t expect any fresh changes in rebar futures for now, and prices should remain volatile," Jiang said.

The most active May rebar contract SRBK1 on the Shanghai Futures Exchange rose 1.5 percent to end at 4,679 yuan per tonne on Thursday from last week.

DEMAND HEADWIND

Steel demand has started to weaken in northern China as winter slows construction activity, and the gradual recovery of operations in Tangshan might add to pressure on market.

"Overall, demand will weakened in winter as construction activity has slowed in Hebei and also in Guangzhou for the Asian Games, and I don''t see any good news for the market over next few months," a senior manager at a Tangshan steel mill said.

All rolling mills in the city''s Fengrun district were told to shut down for five days from last Friday, lifting market sentiment and easing oversupply. However, as rolling facilities restart, the pressure is likely to return.