Prices of steelmaking raw materials iron ore and coking coal climbed in China to their strongest level since March on May 15, spurred by firm steel consumption in the world's top user.
Stockpiles of construction steel product rebar held by Chinese traders have fallen by more than a third from a five-year high in mid-March with construction activity in full swing.
Underlining strong demand, average daily crude steel output at Chinese mills reached 2.56 million tonnes in April, the most since at least May 2014, based on Reuters calculation of Chinese government data.
"The increase in operations at steel mills in China following the winter-induced production curbs has seen demand pick up strongly in recent weeks," ANZ analysts said in a note.
"Combined with the better-than-expected economic data, this has boosted sentiment in the steel sector."
Other data released on May 15 showed China's industrial output grew 7%, outpacing market expectations.
The most-traded September iron ore contract on the Dalian Commodity Exchange rose as far as 494 yuan/t ($78/t) in early deals, a level last seen on March 19. It later pared gains, trading at 484.50 yuan/t by 0229 GMT, up 0.1%, as steel futures retreated.
The most-active October rebar on the Shanghai Futures Exchange was off 0.4% at 3,659 yuan/t, after earlier hitting a nearly two-week top of 3,715 yuan/t.
Rebar inventory at Chinese traders reached 6.39 million tonnes on May 11, down 35% from a five-year high in mid-March, data showed.
Tracking firmer futures, spot iron ore for delivery to China's Qingdao port .IO62-CNO=MB jumped 2.2% to $68.93/t on May 14, its loftiest since March 16, according to Metal Bulletin.
The increase in steel output followed the lifting of production restrictions in nothern China - in place between November 15 and March 15 - that are part of Beijing's campaign to fight pollution.
While some cities have extended the curbs, many mills ramped up output to meet a pickup in construction demand following the winter lull.
Also on May 15, coking coal futures were up 0.7% at 1,266.50 yuan/t and coke rose 0.5% to 2,088 yuan/t, after both initially touched 10-week peaks.
Sources:sxcoal
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