SINGAPORE, Mar 4: Shanghai steel rebar futures fell nearly 3 percent on Monday in their steepest drop since October 2011, hit by worries that China’s latest efforts to cool its property sector will dent demand for steel.
The drop in Shanghai rebar to its lowest since mid-December dragged down iron ore swaps, reflecting caution that spot prices of the raw material may fall as Chinese appetite wanes. Chinese equities also slid as property shares tanked.
The most traded rebar contract for October delivery on the Shanghai Futures Exchange was down 2.8 percent at 3,909 yuan ($630) a tonne by the midday break, on course for its biggest daily fall since Oct. 20, 2011 when the price slid by almost 4 percent.
Rebar, or reinforcing bar, used in construction, hit a session low of 3,898 yuan, its weakest since Dec. 14, 2012.
China could increase required down payments and loan rates for buyers of second homes in cities where prices are rising too quickly, the State Council, the country’s cabinet, said on Friday in the central government’s latest move to contain housing costs.
Last month, the State Council said it planned to extend a pilot property tax programme to more cities and urged local authorities to put price-control targets on new homes.
‘The market is too hot and the central government feels it’s a threat,’ said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.
China’s campaign to rein in home prices is in its third year although, despite these efforts, average home prices in the 100 biggest cities rose for an eighth consecutive month in January.
‘It’s impossible for the central govt to crack down on the property market too seriously because the local government needs a booming property market to support its infrastructure spending, which is important to maintain a certain level of economic growth,’ said Liu.
Iron ore swaps fell as investors anticipated a decline in prices in the physical market.
The March contract dropped to as low as $143.50 a tonne after settling at $148 on Friday, and the April contract slid to $137.50 from $142.25, brokers said. The contracts are cleared by global top clearer Singapore Exchange.
‘We’re seeing sentiment-driven selling,’ said a Shanghai-based iron ore trader.
China’s fresh bid to curb spikes in property prices will keep spot iron ore prices under pressure for this week, although unless Chinese steel mills cut production significantly, it is unlikely to pull down prices steeply, he said.
Benchmark 62-percent grade iron ore fell 0.7 percent to $150.60 a tonne on Friday, the lowest since Jan. 30, according to data provider Steel Index.
(agencies)
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