SINGAPORE, Oct 25: Shanghai steel futures steadied on Friday after falling to their lowest in almost four months in the previous session, but prices are still bound to post their eighth weekly loss out of 10 amid tepid demand.
The weakness in China’s steel market has curbed buying interest in raw material iron ore, sending Dalian futures down nearly 5 percent in their first week of trading.
The most briskly traded rebar contract for May delivery on the Shanghai Futures Exchange was little changed at 3,612 yuan ($590) a tonne by the midday break. The contract touched 3,601 yuan on Thursday, its lowest since July 1, and is down 1 percent for the week.
‘It will be tough for steel prices to recover since China is entering the cold season, so there’s less construction activity. We’re also seeing weak demand for iron ore,’ said an iron ore trader in China’s eastern Shandong province.
In a sign of slow demand, stockpiles of construction steel product rebar held by Chinese traders have been steady at 5.8 million tonnes over the past three weeks, according to data compiled by Bank of America Merrill Lynch.
At the Dalian Commodity Exchange, the most-traded May iron ore contract was unchanged at 928 yuan a tonne. It fell to 916 yuan on Thursday, its lowest since the bourse launched iron ore futures on Oct. 18.
The contract has fallen 4.8 percent so far for the week.
‘We have 300,000 tonnes of iron ore stocks and we’re having great difficulty selling them even at the level of our cost because the market is really weak,’ said the Shandong-based trader.
Other traders have stopped quoting their cargoes in the spot market, hoping that would help stem the fall in prices, said a trader in Shanghai, adding market participants are looking forward to China’s key Communist Party meeting in November for signals on economic reforms that could spur demand for steel and iron ore.
Spot iron ore prices are similarly soft, with prices down 0.7 percent this week. The benchmark 62-percent grade iron ore rose a modest 0.2 percent to $133.50 a tonne on Thursday, after falling to a 1-1/2-week low on Wednesday, according to data compiled by Steel Index.
(AGENCIES)
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