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UPDATE 1-China steel rises for 4th straight month after upbeat PMI
August 31, 2017 / 7:10 AM / 3 months ago

UPDATE 1-China steel rises for 4th straight month after upbeat PMI

* China steel PMI at fastest pace since April 2016

* Dalian iron ore jumps nearly 4 pct, up for third straight month

* Macquarie ups Q3 iron ore forecast to $73 from $50

* Spot iron ore on track for third monthly gain (Adds China steel PMI, updates prices)

By Manolo Serapio Jr

MANILA, Aug 31 (Reuters) - Chinese rebar steel futures rose nearly 2 percent on Thursday and posted their fourth monthly gain in a row after data showed growth in the country’s manufacturing sector sped up in August, underpinning the outlook for steel demand.

Iron ore futures climbed almost 4 percent and also ended August higher, rising for a third straight month.

China’s Purchasing Managers’ Index rose to 51.7 this month from July’s 51.4, topping market expectations and staying well above the 50-point mark that separates growth from contraction on a monthly basis.

Separate data showed activity in China’s steel industry - the world’s biggest - expanded in August at the fastest pace since April 2016 as mills boosted output to chase rising prices.

“We think this positive development in China’s economy is a tailwind for commodity demand, which should not be underestimated any more,” Argonaut Securities analyst Helen Lau said in a note.

The most-active rebar on the Shanghai Futures Exchange closed up 1.8 percent at 3,927 yuan ($596) a tonne, after falling as much as 1.9 percent earlier. The construction steel product rose nearly 11 percent this month.

Iron ore for January delivery on the Dalian Commodity Exchange, also the most-traded contract, jumped 3.9 percent to end at 573 yuan per tonne. The steelmaking raw material gained 5.7 percent in August.

Amid fatter margins, Chinese steel producers have increased steel production and restocked on raw materials, prompting investment bank Macquarie to upgrade its iron ore price forecast for the third quarter to $73 from $50.

“As long as steelmaking margins remain wide, mills have little incentive to tap into the ample supply of lower-grade ore sitting at ports, and a destocking cycle is increasingly unlikely,” Macquarie said in a report.

But the bank sees iron ore easing to $65 in October-December on the back of rising seaborne supply.

“Given a slowing real estate sector in China, our view remains that high-cost supply will need to be displaced as we move towards 2018,” it said.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slipped 0.4 percent to $76.08 a tonne on Wednesday, the lowest since Aug. 17, according to Metal Bulletin.

The spot benchmark is on course for a third consecutive monthly increase, but the August gain of 3.2 percent so far was a fraction of last month’s 13.5 percent spike.

$1 = 6.5942 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Sunil Nair and Kenneth Maxwell

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