Reinforcing bars on the Shanghai Stock Exchange hit a six-month high amid strong demand

Steel rebar futures on the Shanghai Stock Exchange have stabilized near their highest level since April this year, supported by robust consumer demand in China, which also keeps iron ore spot prices at six-month highs.

Steel production at factories that are members of the China Metallurgical Association fell 1.9 percent to 13.61 million tons from Oct.10, Morgan Stanley said.

At the same time, the average daily steel production was 1.72 million tonnes on October 11-20, down 1.3 percent from the previous 10 days. "The drop in production is the result of increased service to factories due to pressure from pollution and rising costs," according to analysts at Morgan Stanley. “We assume that metallurgical plants are waiting for further price increases,” they specify.

Rebar on the Shanghai Futures Exchange rose 0.6 percent to 2,644 yuan ($ 391) a tonne. The contract touched 2,665 yuan, the highest level since April 25.

Lower blast furnace utilization and low inventory will drive steel prices higher as demand for steel rises, analysts say. Further signs of economic recovery in China are also fueling sentiment. China's services sector grew at its strongest pace in October in four months.