SHANGHAI: Shanghai steel futures hit a four-week high on Friday, as investors shrugged off an early steep fall due to a global commodity selloff to focus instead on a price rally in raw material iron ore.
Global equity and commodity markets tumbled overnight on concerns about a US Federal Reserve plan to scale back its bond-buying stimulus now the US economy is expanding more strongly.
The most-traded October rebar contract on the Shanghai Futures Exchange reversed an early 1.5 percent decline to hit 3,547 yuan ($580) a tonne, its highest since May 27. It was trading up 1.1 percent at 3,521 yuan at the midday break.
"Some bullish investors are taking positions, betting that the robust gains in iron ore prices will support rebar against sharp falls," said Wang Bing, a broker with Orient Futures in Shanghai.
Spot iron ore prices surged to a four-week high as some large trading companies bought cargoes at rising prices in a bid to boost the market, traders said.
The benchmark 62-percent grade iron ore index extended gains for a sixth straight day to $120.60 a tonne on Thursday. It was on course for the second-biggest weekly gain this year, according to the Steel Index.
However, some traders believe the gains are unlikely to be sustained in coming weeks as real demand from steel mills is not picking up strongly enough to keep pace with price rises, while a growing steel supply glut will weigh on prices.
Iron ore swaps cleared by the Singapore Exchange started to fall on Thursday, with the most active July contract slumping $3 to $114.75 a tonne.