SINGAPORE, Apr 17: Shanghai steel futures dropped for a fourth straight day on Wednesday, reflecting uncertainty on the outlook for Chinese demand that may curb appetite for raw material iron ore.
The price of iron ore — China’s biggest commodity import by volume and the top money spinner for global miners Vale , Rio Tinto and BHP Billiton — fell back below $140 a tonne this week and remains 12 percent off this year’s peak as slower Chinese economic growth kept demand in check.
Price offers for imported iron ore cargoes in China fell by a dollar per tonne on Wednesday, after the benchmark 62-percent grade <.IO62-CNI=SI> declined 1.1 percent to $139.40 a tonne on Tuesday, based on data from compiler Steel Index.
‘Many mills in China continued to retreat from the market as the outlook looks increasingly bearish,’ the Steel Index said.
Rio Tinto sold a cargo of 61-percent grade Australian Pilbara iron ore fines at $138.59 per tonne at a tender on Tuesday, down more than $2 from a sale of a similar grade last week, traders said.
Limited offers for spot cargoes are helping provide some support to iron ore prices, but it may be difficult for mills to buy big volumes since weaker steel prices mean they continue to incur losses, said a Shanghai-based trader.
‘We are not keen on taking positions right now. Although we believe that there’s still underlying demand because to continue running the mills (steel producers) need iron ore, the overall direction of the market is not very clear,’ he said.
The most actively traded rebar contract for October delivery on the Shanghai Futures Exchange was down 0.7 percent at 3,696 yuan ($600) a tonne by the midday break.
Rebar, or reinforcing bar, a steel product used in construction, hit a 2013 low of 3,665 yuan on Tuesday during a broad-based sell-off in commodities sparked by worried over slower growth in China and the United States.
China’s economy grew a less than forecast 7.7 percent in the first quarter, dashing market hopes for a rebound to at least 8 percent and signaling that the world’s No. 2 economy may have yet hit bottom.
Still, global miners are pinning their hopes on Chinese demand staying firm.
BHP Billiton maintained its guidance for full-year production of 183 million tonnes. Despite the bad weather, BHP said iron ore output increased 6 percent during the March quarter to 40.2 million tonnes.
Rival Rio Tinto said on Tuesday that it remained on track to boost output of the steelmaking material to 265 million tonnes this year under a multi-billion-dollar expansion plan.
(AGENCIES)
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