SINGAPORE, Oct 16: China steel futures fell on Wednesday, tracking softer equities and pressured by slower demand in the world’s top consumer that is also keeping in check appetite for raw material iron ore.
Slower steel consumption in China is underlined by ample inventories at traders with demand not picking up pace since last month and possibly starting to slip when winter, which could start in November, curbs construction activity.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange was down nearly 1 percent at 3,581 yuan ($590) a tonne by the midday break. It touched a session low of 3,575 yuan, the weakest in a week.
‘Steel stocks have been rising in the past weeks because consumption is not very good,’ said Ting Zhou, analyst at Jinrui Futures in Shenzhen, adding the weaker Chinese equities are also hurting investor sentiment. Key Chinese stock indexes have fallen more than 1 percent.
Inventories of five major steel products in China had risen to about 15 million tonnes as of Oct. 11 from about 14 million tonnes in early September, said Zhou, citing estimates from the China Iron and Steel Association.
Shanghai rebar is down slightly this month after falling more than 4 percent in September. The weaker steel market is keeping mills cautious in buying iron ore, traders said.
‘There’s a bit of restocking that’s taking place because of the long Chinese holiday in early October and this is keeping iron ore prices firm,’ said a Hong Kong-based trader.
‘We are getting enquiries but customers are getting more cautious and are buying in small lots because steel prices have been very weak for the past one and a half months,’ he said.
The increased supply in the spot market is helping put a lid on the benchmark 62-percent grade price <.IO62-CNI=SI> which last stood at $133.60 a tonne on Monday. There was no price assessment from compiler Steel Index on Tuesday because of the public holiday in Singapore.
‘I think $135 is feeling toppish. There are more prompt cargoes available from the miners. Two months ago, even if you call them and offer aggressive prices, they don’t have anything to sell,’ said a trader in Singapore.
BHP Billiton is offering 90,000 tonnes of Australian Yandi iron ore fines with iron content of around 58 percent at a tender closing later on Wednesday, traders said. A similar grade was sold at $123 a tonne last week, they said.
Rio Tinto on Tuesday reported that its iron ore output hit a record high in the third quarter with the miner saying it is on track to reach a full run-rate production of 290 million tonnes a year by the end of the first half of 2014.
(AGENCIES)
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