Posted on 15 Dec 2014
Chinese rebar and iron ore futures inched up on Monday morning, prolonging a rebound that began last Wednesday amid thin trading volumes, but with spot iron ore down over 3 percent last week, few expect any sustained upturn in fortunes.
The most-traded May rebar contract in Shanghai ended Monday morning up 0.2 percent at 2,584 yuan a tonne. Iron ore for May delivery on the Dalian Commodity Exchange ended 0.8 percent higher at 489 yuan a tonne.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI slipped 0.2 percent to $68.70 a tonne on Friday, ending the week down 3.1 percent, according to data compiled by The Steel Index.
In an assessment of the iron ore market published on Friday, the China Iron and Steel Association (CISA) said there was little likelihood of any immediate improvement in demand in the coming weeks, adding that traders have been slashing their orders since November.
It said some restocking was expected in December, but few expect it to be enough to offset the seasonal decline in demand or lead to any significant upturn in prices.
"You can say conditions are very poor right now, and even if you add on the winter restocking demand, it is unlikely to lead to any breakthrough," said Zhou Xiaocheng, a manager at the Tangsong Steel Economic Research Institute in Tangshan, a major steel producing city in Hebei province.
Zhu Jimin, CISA's vice-chairman, said at the end of last week that China's mills were now adjusting to a "new normal" in which the strongest would thrive while the weakest went under.
Data from China's National Bureau of Statistics at the end of November showed that despite weak prices and persistent overcapacity problems, six of the country's 10 biggest steel enterprises raised output from January to October.
According to CISA, the profits of its 88 member firms are also set to reach a three-year high this year.
Analysts at online steel trading portal GTXH.com said in a note on Monday that the market was anticipating further interest rate cuts and pro-growth policies, as well as fresh steel capacity restrictions as a new environmental law goes into effect, but market fundamentals remained weak.
