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China steel prices at nine-week high, iron-ore demand congests ports

9th Feb 2009, 12:25 pm China steel prices at nine-week high, iron-ore demand congests ports

China stocks rose, led by metal shares. The Shanghai Comprehensive Index advanced 1.99 percent to 2224.71.


Chinalco (601600,SH; 02600,SZ), China's largest aluminium producer, surged to the 10 percent trading cap after aluminum prices gained 3.3 percent to RMB 12,220 a ton today after the company appointed former executive Xiong Weiping as chairman, replacing Xiao Yaqing. Goldman Sachs raised Chinalco from "neutral" to "buy".


Jiangxi Copper Co.(600362,SH; 00358,HK), China's second-largest smelter of the metal and Yunnan Copper (000878,SZ), the No.3, both surged by the 10 percent trading limit.


China steel prices at nine-week high, iron-ore demand congests ports


Steel prices are at a nine-week high and according to China Security News, a steel industry association official has said there is space for a further rise.


The surge in demand has caused congestion at Chinese ports off-loading iron-ore that is contributing to rising ocean freight rates. The Baltic Dry Index, a gauge of commodity shipping costs, advanced a 14th day. The steel industry accounts for almost half of all dry-bulk cargo.
With a 7.5 percent tumble in hot-rolled steel prices traded in Shanghai last week, it is clear demand is mainly driven by rod products for the construction boom being initiated by China's economic stimulus plan.


Wuhan Iron & Steel Co., China's fifth largest steel producer, was among the companies who raised March price. Tangshan Iron & Steel Co. (000709,SZ), the pulicly traded unit of China's second-biggest steelmaker, surged 10 percent limit.

Angang Steel Co.(000898,SZ;00347,HK), China's second-biggest mill, rose 5.08 percent on Shenzhen trading.


China Cosco (601919,SH; 01919,HK), the world's largest operator of dry-bulk ships, rose the 10 percent limit. Rizhao Port Co.(600017,SH), China's largest iron ore port, rose 9.07 percent.

Wheat output uncertain as China fights drought


The worst drought in half a century in northern China has affected about 161 million mu (10.73 million hectares) of crops, according to state news on Friday.


Last Wednesday, China raised the drought emergency alert level from orange to red, the highest level. On the same day, the central government announced it would earmark RMB 300 million for local governments, in addition to 100 million previously allocated.


On Friday, the Ministry of Finance advanced RMB 86.7 billion (US$12.69 billion) from its reserves to drought-hit areas in relief funds.


The MOF ordered local governments to channel the funds to rural residents who are dependent on wheat production as soon as possible. In the worst drought-stricken provinces, the funds should arrive within one month.


It is still too early to estimate the influence of the drought on his year's crop but sales of irrigation equipment will rise for certain with of government support.


As of last Friday, 5.5 million irrigation machines have been deployed in drought relief. The Ministry of Agriculture said it would offer farmers subsidies on irrigation equipment purchase to aid the relief work.


Shares of pump manufacturers gained significantly. Zhejiang Leo Co.(002131,SZ), China's largest micro-pump producer, surged by its third consecutive 10 percent limit today.

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