Mon, 2 Dec 07:19:00 GMT
* China official PMI holds at 18-month high
* China steel PMI rebounds to 49 from 47.5
(Adds UOB-Kay Hian comment, updates prices and adds milestone)
By Manolo Serapio Jr
SINGAPORE, Dec 2 (Reuters) - Chinese steel rebar futures rose to their highest in almost seven weeks on Monday, after data showed manufacturing activity in the world's No. 2 economy stayed at a brisk pace last month.
Firm domestic and foreign demand helped China's official Purchasing Managers' Index hold at an 18-month high of 51.4 in November, ahead of market expectations for a reading of 51.1. [ID:nL4N0JE273]
The PMI for the country's steel sector rebounded to 49 from 47.5 for the same period, spurred by a recovery in new orders, said Jinrui Futures analyst Zhou Ting in Shenzhen, citing data from the China Federation of Logistics and Purchasing.
"This could mean that steel demand in December would be better than we estimated previously," said Zhou, who sees rebar trading near 3,750 yuan a tonne this month.
The most-traded rebar for May delivery on the Shanghai Futures Exchange touched a session high of 3,698 yuan
($607) a tonne, its loftiest since Oct. 16. It closed up 0.7 percent at 3,695 yuan, gaining for a third session in a row.
Rebar, used in construction, rose less than 1 percent last month as lean demand limited a recovery in prices from losses of more than 5 percent in September and October.
"We think the downside risks to steel prices are limited in the near term due to low inventory risk," UOB Kay Hian Securities said in a note.
"During year-end period, tight working capital will normally lead to destocking by steel mills and traders to repay outstanding dues. Given the current low inventory level, we think downside risks on steel prices will be limited with the absence of destocking pressure."
A separate reading from HSBC put China's overall PMI at 50.8 in November, down from 50.9 in the prior month but higher than an initial reading of 50.4. [ID:nB9N0IQ01F]
"Overall, the November PMIs continue to point to stable domestic economic conditions. But the details appear to support our view that growth momentum has softened in the fourth quarter," Barclays Capital economists said in a note.
Barclays forecasts China's gross domestic product growth to slow to 7.6 percent in the fourth quarter from 7.8 percent in July-September.
At the Dalian Commodity Exchange, the most-active iron ore for May delivery ended down half a percent at 936 yuan a tonne, after rising for the past two sessions.
Chinese demand for iron ore mostly held up in November as high steel production sustained appetite among mills for the raw material.
Spot iron ore prices ended November with a gain of 3.4 percent, the highest monthly increase since August, as prices bounced off 1-1/2-month lows hit in late October and stabilised between $135 and $137.
Iron ore for immediate delivery in China's Tianjin port <.IO62-CNI=SI> was unchanged at $136.40 a tonne on Friday, said data compiler Steel Index, as ample supplies limited gains.
Iron ore stocks at major Chinese ports continued to rise last week, increasing by nearly 2 million tonnes to 87.4 million tonnes, according to data from industry consultancy Mysteel.
Shanghai rebar futures and iron ore indexes at 0704 GMT
Contract Last Change Pct Change
SHFE REBAR MAY4 3695 +25.00 +0.68
DALIAN IRON ORE MAY4 936 -5.00 -0.53
THE STEEL INDEX 62 PCT INDEX 136.4 +0.00 +0.00
METAL BULLETIN INDEX 137.15 -0.23 -0.17
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.0932 Chinese yuan)
(Editing by Himani Sarkar)
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