Production of steel reinforcement bars rose by 14 per cent to 113 million metric tons in the first seven months and stockpiles slumped by 35 per cent from an all-time high.
Rebar, accounting for almost one-third of steel output in China, will average $655 a ton in the fourth quarter, 7.1 per cent more than now and the highest in more than a year, according to the median of 15 analyst estimates.
Data compiled by Bloomberg News on Sunday, showed that the appetite for steel suggests sustained demand for commodities, even as Premier Li Keqiang tries to curb excess lending and shutter inefficient plants in industries from metals to cement.
Imports from copper to crude oil are rebounding as manufacturing data add to signs that China will meet Li’s 7.5 per cent growth target this year.
“The overcapacity that everybody was so worried about is turning out to be moot because 2013 is shaping up as a record year for steel demand,” said JiaLiangqun, chief analyst at Mysteel Research, the Shanghai-based company that provides data to the National Development and Reform Commission.
“To reduce the pain as it rebalances the economy, the government has no choice but to keep doing one of the things it does best — investment in infrastructure, real estate and fixed assets.”
Rebar advanced 10 percent to 3,735 yuan on the Shanghai Futures Exchange since reaching this year’s low on June 14 and may extend the rally to 20 per cent by the end of 2013, meeting the common definition of a bull market.
The forecasts in the Bloomberg News survey of analysts ranged from 3,800 yuan to 4,200 yuan.
The metal remains 5.6 per cent below its closing level at the end of last year, compared with a 1.7 per cent gain for the Standard & Poor’s GSCI gauge of 24 commodities.
The MSCI All-Country World Index of equities added 8.9 per cent and the Bloomberg US Treasury Bond Index lost 3.8 per cent.
Hebei Iron & Steel Company, China’s biggest producer, may double profit per share this year, according to the average of four analysts’ estimates compiled by Bloomberg.
Rising rebar prices should help most of the nation’s mills, which make almost one in every two tons of the world’s steel.
“We are running our mills at record rates and inventory still has not increased,” Liu Chunjian, Hebei Iron & Steel’s deputy head of marketing in Beijing, said by phone on August 28.
Growth in demand for steel may be crimped by government efforts to tighten lending and toughen approvals for new homes as it seeks to curb surging housing costs.
New-home prices increased for a third month in July in all but one of 70 cities tracked by the government, rising by 17 per cent from a year earlier in the southern business center of Guangzhou, the National Bureau of Statistics said August 18.
China Railway Corporation, which took over the network of the dismantled Ministry of Railways in March, is facing its highest borrowing costs in two years, a month after Li said that new railroads were key to stimulating the economy.
The company sold seven-year notes at 5.06 per cent on August 26, 49 basis points more than a similar-maturity offer in October and the highest for that tenor since 2011, data compiled by Bloomberg show.
Still, the government looks more likely to support infrastructure and property investment than to curb them, Macquarie Group Limited analysts led by Jiong Shao in Hong Kong said in a report August 19. Investment in infrastructure will expand by 20 per cent this year, creating demand for another 135 million tonnes of steel, according to Jiang Yujiao, an analyst at Citic Securities Company in Shanghai.
Concrete reinforced with rebar will be used in almost every bridge, station and rail tie along 23,000 kilometers (14,000 miles) of track being built by the end of 2015 to meet the government’s expansion target, according to Wu Wenzhang, head of research at Shanghai Steelhome Information Technology Company.