SINGAPORE, May 16: Shanghai steel futures fell to their lowest in eight months on Thursday, reflecting weaker demand in top market China that has cut buying interest for raw material iron ore whose price has dropped to the cheapest since December.
A more modest pace in China’s economic recovery has slowed demand for steel during what is typically the busiest quarter for the steel market, bloating stockpiles and dragging down prices.
The most-traded rebar contract for October delivery on the Shanghai Futures Exchange touched a session low of 3,526 yuan ($570) a tonne, a level not seen since early September. By 0315 GMT, it was down 1 percent at 3,559 yuan.
Rebar, or reinforcing bar which is used in construction, has fallen 19 percent from a nine-month high of 4,382 yuan in February.
‘It is very likely that we will see a further decline in prices. Production remains very strong, but downstream demand is very weak so that’s why destocking has been very slow,’ said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong.
Steel traders had been running down stocks since stockpiles hit a record high of 22.5 million tonnes in March, based on estimates by industry consultancy Mysteel. The inventories, which include rebar and hot-rolled coil, remained high at 19.7 million tonnes last week.
The slow steel demand in China, whose annual consumption of the alloy represents about half the world’s, is curbing appetite for iron ore.
Benchmark 62 percent grade iron ore <.IO62-CNI=SI> fell 1.3 percent to $126.40 a tonne on Wednesday, matching a level last seen on Dec. 13 last year, according to data from information provider Steel Index.
The price of iron ore, the biggest earner for top miners Vale and Rio Tinto , has fallen by a fifth from February’s 16-month high of $158.90.
With China’s daily crude steel production staying high at above 2 million tonnes, there is still interest for iron ore although most mills are buying hand-to-mouth and seeking lower prices, traders said.
China’s daily crude steel output hit a record high of 2.129 million tonnes from April 21 to 30, based on estimates by the China Iron and Steel Association released last week.
(agencies)
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