07 Feb 2018
Steel-making commodity coke surged to a six-week high in China and steel and iron ore prices rose to their strongest in over a week, with investors raising their bets amid supply disruptions and defying a selldown in global financial markets.
Steel-related commodities were among a handful that managed to evade the global market rout that followed Wall Street's biggest decline since 2011.
China's aggressive bid to tackle overcapacity, along with production curbs to fight smog, have helped tighten supply in the world's top steel producer. The efforts fuelled a nearly 50-percent surge in steel prices last year and a spike in profit margins to their strongest in decades.
Prices of steel and its raw materials have remained resilient this year, with winter output curbs in place until March. Transport disruptions due to China's heavy snow have also fuelled a rally in coking coal and coke futures.
"Fundamentally speaking, the steel market is really, really supported," said CRU analyst Richard Lu in Beijing.
"Right now, even if there's some decrease in demand, the winter cuts help keep a relatively tight supply-demand balance."
The firm supply-demand picture helped sustain appetite for ferrous futures despite slumping financial markets in Asia, after Wall Street's tumble triggered a sharp selloff in equities and oil, pushing investors towards safe-haven assets such as gold and the dollar.
China had ordered steel producers across 28 cities to cut output by up to half from November until March in a campaign against air pollution.
"The slump in U.S. stocks was more of a worry over inflation and interest rates, which won't have much impact on commodities here," said Wu Ren, senior manager at Shanghai Xiangguang Metals.