Chinese steel futures prices picked up again on Wednesday, in part because of a stabilisation of the Shanghai stock market. The underlying support for higher prices appears to be real however, with mills finally cutting production in response to weak demand, Kallanish notes.

The January 2016 rebar contract on the Shanghai Futures Exchange closed up CNY 36/tonne at CNY 2,110/t ($345/t), while the October 2015 hot rolled coil contract closed up CNY 19/t at CNY 2,064/t.

The end of another record-breaking decline in Chinese stock markets earlier in the week leant confidence to speculators. The Shanghai Composite Index closed up 3.44% at 3,789 on Wednesday.

Supporting the higher steel futures prices were real increases in spot steel prices over recent days however. Many analysts have pointed to a possible decline in Hebei steelmaking in September during a commemorative parade in Beijing. The decline in output has been much more widespread and market-driven however.

The end of June began to see a decline in blast furnace utilisation as loss-making mills decided to reduce output. This has allowed traders in several markets to push higher prices, sometimes as much as CNY 200/t. Although real steel prices may settle with smaller gains, prices are finding a balance at higher levels than in the last three weeks.