Steel futures in China, the world’s biggest producer of the manufacturing and construction material, rose to a more than two-week high on Wednesday on expectations the Russia-Ukraine conflict will boost demand for Chinese steel overseas.
Russia, which is facing an unprecedented wave of economic sanctions from Western allies over its invasion of Ukraine, accounts for an estimated 10% of global steel trade, while Ukraine has a 4% share, according to Huatai Futures analysts.
The supply interruption will force some major buyers to seek alternative sources, and “currently only China can fill this huge market vacancy”, the analysts said in a note.
The most-active May contract for hot-rolled coil, which is steel used in car bodies and home appliances, on the Shanghai Futures Exchange ended daytime trading 2.1% higher at 5,138 yuan ($814.06) a tonne, after touching 5,158 yuan earlier in the session, the highest since Feb. 11.
Construction steel rebar climbed 1.8% to 4,860 yuan a tonne, after peaking at 4,893 yuan, highest since Feb. 14.
Prospects for increased domestic steel demand also supported prices, analysts said, ahead of China’s annual parliament meeting on Saturday, when it is likely to unveil more stimulus to ease a growth slowdown.
Higher steel prices boosted interest in steelmaking ingredients such as iron ore and coking coal.
The most-active May iron ore contract on China’s Dalian Commodity Exchange surged as much as 5.9% to its highest since Feb. 15.
On the Singapore Exchange, iron ore’s front-month April contract was up 0.5% at $148.80 a tonne by 0707 GMT.
Disruptions to iron ore exports from Russia and Ukraine have also reportedly prompted some European buyers to seek alternative sources, potentially tightening global supplies.
Dalian coking coal and coke, however, pared gains after hitting their highest since October, closing up 3.9% and 2.8%, respectively.