April 8, 2019 / 8:30 AM / 4 months ago

UPDATE 1-China's rebar hits 7-1/2-yr high, iron ore at record peak

* Shanghai rebar jumps as much as 4.8 pct on seasonal demand

* Dalian iron ore posts record peak above 700 yuan/T

* Port Hedland iron ore shipments to China slip more than 8 pct

* Q2 steel output curbs in Tangshan, Handan ‘stricter’ vs yr ago (Updates with milestones, comments, closing prices, and graphics)

By Enrico Dela Cruz

MANILA, April 8 (Reuters) - China’s steel futures on Monday surged on a seasonal upturn in demand, lending support to prices for steelmaking raw materials, including iron ore, which extended a record-breaking rally fuelled by worries over tightening supply.

The most active construction steel rebar contract on the Shanghai Futures Exchange rose for a sixth straight session by as much as 4.8 percent to 3,755 yuan ($559) a tonne, before ending 4.1 percent higher at 3,730 yuan. That was the highest close for the benchmark in seven-and-a-half years, or since September 2011.

Hot rolled coil, used for cars and home appliances, climbed 3.1 percent to 3,944 yuan a tonne.

“The physical prices of steel have also increased over the last few days, driven by the seasonal demand improvement,” said Richard Lu, senior analyst at CRU Group’s Beijing office.

China steel demand typically picks up at the end of the winter, with April usually the peak month as industrial and other activity starts back up as temperatures warm.

Demand has also risen as construction activities have picked up, and there is also buying as China is set to roll out more infrastructure projects, Lu said.

As steel demand in China rises, production restrictions in the nation’s biggest steelmaking cities of Tangshan and Handan have been extended, providing further support to steel prices.

Lu said a review by CRU of government documents on the extension of output curbs showed the restrictions in the second quarter, while “less strict” compared with the winter season impositions, are “stricter year-on-year”.

“However, what’s important is how well these restrictions will be executed,” he said.

Despite output restrictions during winter, China’s average daily steel production in January to February reached 2.54 million tonnes, up from 2.46 million tonnes in December and 2.32 million tonnes in the same months last year.

Air pollution in 39 smog-prone northern Chinese cities soared in February, making it increasingly unlikely they will meet their annual winter air quality targets, based on Reuters analysis of official data.

With steel mills resuming production to rebuild stocks and fill buy orders, demand for steelmaking ingredients such as iron ore and coking coal has also improved.

The most traded May 2019 iron ore contract on the Dalian Commodity Exchange soared as much as 4.8 percent to 715 yuan a tonne, highest for the Asian benchmark since 2013, when the futures contract was launched.

The iron ore contract gained nearly 10 percent last week, its best performance since the last week of January, as declining shipments from Brazil and Australia amid higher demand from Chinese steel mills tightened supply.

Iron ore shipments to China from Australia’s Port Hedland terminal, the world’s biggest iron ore port, fell more than 8 percent in March from a month earlier, port data released on Friday showed.

Spot 62-percent grade iron ore for delivery to China SH-CCN-IRNOR62 rose 1.6 percent on Thursday last week to $93 a tonne, before a three-day weekend for China’s financial markets, according to SteelHome consultancy.

Coking coal on Monday rose 1 percent to 1,258.5 yuan a tonne, and coke climbed 1.4 percent to 2,048.5 yuan.

($1 = 6.7174 Chinese yuan)

Reporting by Enrico dela Cruz; Editing by Tom Hogue and Sherry Jacob-Phillips

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