Steel traders in China typically replenish their inventory ahead of the Lunar New Year holiday, which starts this year on Feb. 4, and sell them off when downstream users - especially construction sites - restart activities in the spring. This year, traders have been reluctant to boost their stocks in recent weeks due to economic uncertainties, but the latest increase in stockpiles indicates more confidence about post-holiday demand from downstream sectors.
"Growth rates for inventory replenishment get closer to the pace during same period last year ... But demand will further shrink as this holiday season is getting closer," said analysts from Huatai Futures in a note. Benchmark Shanghai rebar prices closed 1.4 percent higher at 3,710 after hitting a peak of 3,740 yuan ($553.38) a tonne during early trade, their highest since Nov.1. The contract settled up 3.2 percent this week, its strongest week since December 7. Hot-rolled coil futures rose 0.9 percent to 3,608 yuan a tonne when market closed at 0700 GMT.
Price hikes for steel helped to support most of steelmaking raw materials, as investors expect steel mills to ramp up output alongside firm steel prices.
Weekly utilisation rates at steel mills across the country picked up for a third straight week to 65.47 percent, up from 64.92 percent last week, according to data compiled by Mysteel.
The most-active iron ore futures on the Dalian Commodity Exchange edged up 0.3 percent to 534 yuan a tonne.
Dalian coking coal pared early gains and closed 1.1 percent lower at 1,213 yuan, while coke contract for May delivery climbed 0.4 percent to 2,048.5 yuan.