Posted on 12 Mar 2015
Chinese rebar futures dropped for a sixth session in a row on Wednesday as weak demand kept producers’ steel stockpiles high, weighing on appetite for raw material iron ore, prices for which stayed near a record low.
Demand in top steel consumer China is likely to remain soft in 2015 with the economy forecast to grow at its slowest pace in 25 years. Last year, Chinese steel demand shrank for the first time in three decades.
The most-traded rebar for October delivery on the Shanghai Futures
Exchange was down 0.1 percent at 2,468 yuan ($394) a tonne by 0328 GMT,
after matching Tuesday’s record low
of 2,449 yuan.
“A combination of weak construction activity and scheduled
maintenance at steel mills has sidelined a substantial portion of buying
interest (for iron ore) and with inventories of both
flat and long finished steel held at mills increasing,” said Kash Kamal, an analyst at Sucden Financial.
Stocks of flat steel products held at Chinese mills rose 14.4 percent last week from the prior week while inventory of long products increased 15.8 percent, said Kamal.
Average daily crude steel output at China’s large producers jumped 8
percent to 1.771 million tonnes in late February from the preceding
10-day period as mills anticipated a pickup in
demand after last month’s Lunar New Year break.
“We expect continued downward pressure on spot iron ore prices going forward,” he said.
Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI
gained 0.9 percent to $58.50 a tonne on Tuesday, but still near a record
low of $58 reached the previous day,
according to the Steel Index.
ANZ Bank said in a note that Chinese steel mills are doubtful of a “significant pick-up in demand and are wary of the strict environmental regulations”.
China is stepping up its fight against pollution, with local authorities closing a number of mills last week after they failed to meet stricter environmental standards.
