Posted on 28 Jul 2017
China’s steel rebar futures eased after a three-day gain, sliding nearly 2 percent due to underlying concerns about a weak demand outlook amid increasing output at mills.
“When the heat wave across the country is gone, demand may not see a strong rebound despite a seasonal increase in activity,” said analysts at Orient Futures in a note.
Construction work typically slows during periods of hot summer weather, picking up again when temperatures cool in the fall, before the onset of winter.
The China Meteorological Administration said on Wednesday that more than 85 counties and cities across the country experienced temperatures over 40 degrees Celsius (104 Fahrenheit). Some regions have hit record highs.
Traders and analysts said trade volumes in physical markets have dropped with the high temperatures and as the recent price rally has downstream consumers adopting a wait-and-see stance.
Spot steel rose 0.45 percent to 3,945.98 yuan ($586.20) a tonne on Wednesday, according to data on the Mysteel website.
The most-traded rebar contract on the Shanghai Futures Exchange fell 1.8 percent to 3,525 yuan by midday.
Among 24 listed steel firms who published performance reports, 21 saw improved earnings in the first half of this year because of higher profit margins for their steel sales, according to a report from state news agency Xinhua on Monday.
The higher margins have driven steel output higher – as well as the related consumption of iron ore – despite the widespread concerns over more-than-ample inventories.
Baowu Steel Group reported on Tuesday that its profit reached 8.66 billion yuan in the first six months of 2017, with its steel output up 11.5 percent for the period.
China, the world’s largest steel producer, had 419.75 million tonnes in crude steel output in the first half of 2017, up 4.6 percent on same period last year.
That has helped drive iron ore demand over the January to June period. Fortescue Metal Group, the world’s fourth biggest iron ore producer, said on Thursday that its full-year shipments for the year to June 30 came in at 170.3 million tonnes, beating guidance of 165 million tonnes.
Fortescue sells most of its iron ore to China.
Still, given the pull-back in steel prices on Thursday, the most-traded iron ore futures on the Dalian Commodity Exchange slid 0.8 percent to 522 yuan a tonne.
September coking coal futures on the Dalian exchange fell 0.04 percent to 1,271.5 yuan a tonne. Coke futures dropped 0.23 percent to 1,938.5 yuan a tonne.
