Reuters reported that Shanghai steel futures jumped 1.6% on Monday, snapping a week-long fall, following more evidence that China's economy is on the mend, although demand for raw material iron ore is likely to stay subdued along with winter steel sales.
Manufacturing activity in China quickened for the first time in 13 months in November, according to a survey of factory managers by HSBC, adding to evidence that the world's No. 2 economy is recovering after a seven quarter slowdown.
That backed weekend data that showed the country's official Purchasing Managers' Index at a seven-month high for the same period.
The most briskly traded rebar contract for May delivery on the Shanghai Futures Exchange was up CNY 55 at CNY 3,550 (USD 570) a tonne by the midday break.
Rebar, or reinforcing bar which is used in construction, slid 2.4% last week, its fifth consecutive week of decline.
While the manufacturing data bodes well for future demand from the world's top steel consumer, the immediate appetite for steel products is weak because colder weather in China, particularly in the northern part, is limiting construction activity.
A physical iron ore trader in Shanghai said that "I think the rebar futures overreacted to the PMI data. I'm still not optimistic about the steel market in December. Temperature continues to drop in the northern part and that's not positive for demand."
Shanghai rebar futures and spot steel prices in China's key Tangshan area last week fell to levels last seen in September, limiting Chinese mills' interest in iron ore.
Benchmark iron ore with 62% iron content dropped 1.1% to USD 115.60 per tonne on Friday, the lowest since October 19, based on data from information provider Steel Index.