SHANGHAI, Dec 27 (Reuters) - Shanghai steel futures crept up on Thursday to touch a fresh five-month high, with traders attributing the gains to a combination of a buoyant outlook as well as rising costs.
The most active rebar futures contract on the Shanghai Futures Exchange was up 0.18 percent at 3,885 yuan ($620) a tonne by midday close on Thursday, after easing from a fresh five-month high of 3,958 yuan a tonne.
“The positive economic data is helping to lift sentiment but there is also a cost push,” said a Shanghai-based trader.
“Iron ore prices have risen about $20 this month and some players see the strong gains as a sign that steel makers and traders are willing to pay up because they are optimistic about steel demand.”
The rise in Shanghai rebar followed a 110 yuan per tonne increase in the price of steel billet in China’s key Tangshan area, traders said, adding that the increase in arrivals have already pushed up Chinese port prices significantly.
The Metal Bulletin index for 62-percent grade iron ore .IO62-CNI=SI rose $1.22 from Tuesday to $138.71, the highest since early May.
The index is on track to rise nearly 19 percent this month, on par with the sharp rebound seen in September after Beijing announced the approval of some $160-billion worth of infrastructure projects.
In a sign that the rally may still a continue, an Australian cargo of 62 percent grade iron ore was traded at $142 a tonne on globalORE on Thursday, traders said.
“The recent rally in prices has encouraged more steel mills and traders to restock in advance because they’re anxious that prices may climb even higher,” said a second steel trader.
Separately, data showing strong corporate profits in the world’s top steel maker China also buoyed investors’ sentiment.
Profits earned by China’s industrial companies jumped 22.8 percent in November from a year earlier, accelerating from October’s 20.5 percent, data from Beijing showed.
Prices on the Steel Index .IO62-CNI=SI and the Platts Iron Ore Index IODBZ00-PLT were not updated due to the Christmas holiday.
$1 = 6.2353 Chinese yuan Reporting by Ruby Lian and Fayen Wong