Chinese steel futures prices continued to increase on Tuesday on expectations of continued improvement in demand and higher mill list prices. A drop of in speculative activity however means more real spot buying will be needed to support prices, Kallanish notes.

On the Shanghai Futures Exchange the May rebar contract closed CNY 7/tonne higher at CNY 4,035/t ($640/t), the highest since early December, while the same contract for hot rolled coil closed up CNY 19/t at CNY 4,099/t. In Tangshan however billet prices saw their first drop in almost a week, falling CNY 20/t to CNY 3,720/t.

Around 40 Chinese steel mills have now increased their long product list prices in preparation for the expected increase in buying in the coming weeks. Market leader Shagang is also widely expected to announce a significant increase to its list prices for the first ten days of March.

A fall in volumes in futures trading suggests speculators are no longer betting on higher prices after increases already priced in. May rebar futures are already higher than spot rebar and higher than most mill offers for early February. Only a stronger pick-up in real buying activity is likely to push sentiment and prices higher again.