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Red-Hot Steel rally swells on China bets, Powers Zina to nine-year high

Red-Hot Steel rally swells on China bets, Powers Zina to nine-year high
Issue Time:2016-12-02
Chinese steel futures jumped over 6 percent to the highest in 31 months on Monday, as investors raised bets that strong property and infrastructure investment will sustain demand in the world's top consumer, spurring a similar rally in iron ore and zinc.
 
The red-hot rally in steel is bound to push iron ore above $80 a ton for the first time since October 2014, having lifted zinc to a nine-year high.
 
The rapid rise in ferrous metals as well as zinc and lead also reflect a rotation of funds away from fixed-income and into risky assets backed by optimism over global growth into 2017, analysts say.
 
Strong property sales in China along with the government's push for more infrastructure projects via its public-private partnership (PPP) fund have strengthened steel demand while supply is under control as Beijing intensely pursues capacity cuts, said Daniel Meng, analyst at CLSA in Hong Kong.
 
"In the first half of 2017, we will continue to have very strong steel prices because property sales remain very strong at least till October and PPP program is still in early stage and supply side should remain controlled," said Meng.
 
Construction steel product rebar on the Shanghai Futures Exchange rose as much as 6.4 percent to 3,238 yuan ($469) a ton, its loftiest since May 2014. Rebar closed up 4.7 percent at 3,188 yuan, gaining nearly 90 percent this year to end a six-year slide.
 
Amid surging prices, the exchange said it will limit the size of positions taken by non-members in some rebar futures from Tuesday.