SINGAPORE, June 28: Shanghai rebar futures rose with equities on Friday as worries over tight liquidity in China eased, and spot iron ore recovered from a four-day loss as steel mills sought cargoes after prices dropped to 1-1/2-week lows.
But raw material iron ore is still looking to end the second quarter with its steepest loss since July-September last year as slower economic growth curbed the appetite of top importer China.
Rebar followed gains in Chinese equities as the country’s short-term borrowing costs slipped further after the central bank signalled this week it remains ready to address temporary liquidity shortages, calming markets hurt by last week’s cash squeeze.
The most-active January rebar contract on the Shanghai Futures Exchange rose nearly 1 percent to 3,538 yuan ($580) a tonne by the midday break.
Rebar’s gains also pulled up iron ore swaps <0#SGXIOS:>, with July and August contracts extending Wednesday’s climb, traders said, indicating expectations that spot rates will firm further.
But rebar, a steel product used in construction, is down nearly 9 percent for the quarter, reflecting steep losses in April and May as China’s slower economic pace hurt demand.
Benchmark 62-percent grade iron ore <.IO62-CNI=SI> rose 1.3 percent to $115.30 a tonne on Thursday, according to data provider Steel Index, regaining some lost ground after falling by almost 6 percent in the past four sessions.
‘We are seeing some mills coming back to the market and since they have kept their inventories low, they need to start buying with prices firming now,’ said an iron ore trader in Hong Kong.
‘But we think these gains will be short-lived because the steel market remains bearish. Mills will be very cautious in buying raw material at this point in time.’
The price of iron ore — China’s biggest import commodity by volume and the top revenue earner for global miners Vale and Rio Tinto — is down 16 percent for April-June so far. That is its biggest quarterly drop since the third quarter of 2012.
But traders said Chinese demand for imported iron ore will be supported by the country’s high steel output.
China produced an average 2.1643 million tonnes of crude steel a day over the June 11-20 period, up 0.4 percent from the previous 10 days, data from the China Iron and Steel Association showed.
Chinese steel mills have been producing at close to record rates for several months despite weaker-than-expected demand and low prices, which have severely eroded margins in the sector. Shanghai rebar futures and iron ore indexes at 0351 GMT (agencies)
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