Steel hits 2-week high on supply distortion over Russia-Ukraine crisis

BY: ONOME AMUGE

Steel futures jumped to the highest valuation in over two weeks as buyers and consumers of the vital manufacturing and construction material heightened demand for Chinese steel amid the lingering Russia-Ukraine conflict.

In its analysis of the current bullish trend in the steel market, Huatai Futures, one of China’s leading commodity research teams, asserted that the supply interruption in Russia, which accounts for 10 percent of global trade and Ukraine, which has a four percent share, has distorted the global steel trade.

Huatai observed that the situation has weighed more pressure on global demand for steel in China, the world’s biggest producer.

“The supply interruption will force some major buyers to seek alternative sources, and currently only China can fill this huge market vacancy,” Huatai stated.

At the close of Wednesday’s morning trade, the most-active May contract for hot-rolled coil – steel on the Shanghai Futures Exchange (ShFE) was 2.5 percent higher at 5,158 yuan ($817.08) a tonne, advancing for a third consecutive day to the highest since Feb. 11.

In a similar bullish trend, Shanghai construction steel rebar rose 2.5 percent to hit 4,893 yuan a tonne, the strongest since Feb. 14.

Commodity analysts also noted that prospects for increased domestic steel demand in the Asian powerhouse further strengthened prices as China’s parliament set for its annual meeting later in the week (Saturday), a move expected to unveil more stimulus to ease slowdown on industrial growth.

The surge in steel futures also advanced towards steelmaking raw materials, as Chinese iron ore and coking coal futures rose by over five percent in morning trade.

The most-active May iron ore contract on China’s Dalian Commodity Exchange gained 5.9 percent to 764 yuan a tonne, the highest since Feb. 15.

On the Singapore Exchange, iron ore’s front-month April contract surged 1.9 percent to $150.90 a tonne, while Dalian coking coal was up 5.7 percent, the highest in over three months.

According to market reports, disruptions to iron ore exports from Russia and Ukraine, leading European exporters, have forced some buyers in the continent to seek cargoes from other countries, further tightening global supplies.