Shanghai rebar hits 2-week top on upbeat data

But renewed tariff threats from the US keep price gains in check

Chinese steel futures climbed to a two-week high on Thursday, spurred by a survey showing that the manufacturing sector in the world’s second-largest economy grew at the quickest pace in eight months in May.

The official Purchasing Managers’ Index rose to 51.9 in May from 51.4 in April, topping economists’ expectations for a dip to 51.3.

The latest Chinese number “suggests manufacturing remains resilient and domestic growth is chugging along. And amid trade and tariff tensions, this should be interpreted positively,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

The most actively traded rebar for October delivery on the Shanghai Futures Exchange rose as far as 3,680 yuan ($574) a ton, its strongest since May 18.

China’s firm economy bodes well for steel demand in the world’s biggest user, and consumption has been strong in the past months as evidenced by a sustained fall in steel inventories at traders.

Standing at 5.65 million tons last week, stocks of construction steel product rebar have dropped 42 percent from a fiveyear high in mid-March, based on data tracked by Steel Home consultancy.

But Innes said the positive impact of China’s upbeat manufacturing data on risky assets could be fleeting amid continuing trade tensions between China and the US.

“The gnawing concern is that risk sentiment could turn on a dime and by no means does this data suggest we’re shielded from the geopolitical firing line just yet,” Innes said in a note.

“Way too much risk in the markets and far too early in the session to start jumping for joy on the solid China data prints.”

China lashed out on Wednesday at renewed threats from the White House of imposing tariffs on $50 billion worth of imports from China, warning that it was ready to fight back if the US was looking for a trade war.

Outside of China, the US will announce plans to impose tariffs on steel and aluminum from the EU, the Wall Street Journal reported, citing people familiar with the matter.

Iron ore on the Dalian Commodity Exchange was up 0.2 percent at 461.50 yuan a ton, coking coal rose 2.1 percent to 1,234 yuan while coke jumped 1.6 percent to 2,083 yuan.