Chinese commodity futures are staging another gravity-defying rally

Joe Raedle/Getty Images

Chinese commodity futures are ripping higher yet again on Monday, continuing the strong rebound seen during Friday’s overnight session.

Here’s the scoreboard nearing the lunch time break on Monday.

SHFE Copper ¥48,150 , 0.42%
SHFE Aluminium ¥13,905 , 0.51%
SHFE Zinc ¥22,980 , 0.72%
SHFE Nickel ¥91,090 , 3.02%
SHFE Rebar ¥3,612 , 4.73%
DCE Iron Ore ¥722.00 , 4.34%
DCE Coking Coal ¥1,274.50 , 3.91%
DCE Coke ¥1,738.50 , 3.92%

After a sharp unwind in the latter parts of last week, the rebound has been led by rebar futures which have soared by 5%, putting the May 2017 contract on track to close at the highest levels since September 2013.

That rebound has spilled over into other bulk commodities with iron ore, coking coal and coke futures all up by more than 4%. Copper, zinc and aluminium are the relative laggards, rising less than 1%.

“Steel producers in the Hebei-Beijing-Tianjin area have been asked to shift their peak-load production to reduce pollution ahead of the start of China’s National People’s Congress on Friday,” said Helen Lau, an analyst at Argonaut Securities, in a note released on Monday.

Whether a contributing factor behind the sudden rebound in futures or not, the price action underlines just how bullish traders are on the outlook for steel demand ahead of China’s Spring construction season.

In a note released last week, Macquarie Bank said optimism towards the outlook for the steel market was at “extremely elevated levels”, according to its steel sentiment index, fueled by anticipation of strong steel demand during the upcoming the spring construction season.

“Our survey respondents are the most bullish they’ve been in over five years,” the bank wrote in a report this week. “This bullishness is clearly reflected in recent price moves in steel and iron ore.”

After days of heavy losses late lost week, it appears that optimism has resurfaced on Monday if the gains in future are anything to go by.

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