Chinese steel futures prices increased again on Wednesday after profit-taking brought futures lower on Tuesday. The approaching end of the plum rain season in eastern China is fuelling hopes of better demand but the impact of induction furnace closures should be fading, Kallanish notes.

On the Shanghai Futures Exchange the October rebar contract closed at CNY 3,420/tonne ($504/t), up CNY 27/t, while the same contract for hot rolled coil closed up CNY 7/t at CNY 3,430/t.

Domestic rebar traders noted that in eastern China the approaching end of a protracted rainy period could signal a return in construction activity. Shanghai saw heavy rain again on Wednesday afternoon but the bad weather is expected to ease in the coming weeks.

Low inventories and the continuing impact of induction furnace closures remains a more immediate driver of strong prices. Recently analysts in China has commented that the actual impact of closing induction furnaces is equal to 39-70 million tonnes/year of real production. This is a fairly modest figure in relation to the 800m t/y China registered steelmakers are producing however. It also remains uncertain that it will be enough to support the market for the rest of the year.