SINGAPORE, Apr 2: Shanghai steel futures dropped for a fourth day in a row to hit its weakest level for the year on Tuesday, weighed down by tepid Chinese demand that has curbed buying interest for raw material iron ore from the world’s biggest buyer.
A short trading week in China, where markets are shut on Thursday and Friday for public holidays, is also limiting activity in the physical market, traders said.
Traders are eyeing a tender by global miner Rio Tinto for pricing cues, although some expect the cargo of Australian Pilbara iron ore fines to be sold at close to a previous sale.
‘There aren’t much inquiries in the market. Steel futures are going down so everybody’s scared, nobody wants to buy iron ore,’ said an iron ore trader in Shanghai.
The most actively traded rebar contract for October delivery on the Shanghai Futures Exchange touched a session low of 3,705 yuan ($600) a tonne, its weakest since December 5, 2012. It was down 0.8 percent at 3,717 yuan by the midday break.
High stockpiles of steel products in China reflected slack demand, dragging down prices. The price of rebar, used in construction, is down more than 9 percent so far this year.
Inventories of steel products at large Chinese producers surged to a record near 15 million tonnes as of mid-March, according to estimates last week by the China Iron and Steel Association.
That has spurred a cut in average daily crude steel output to 2.064 million tonnes over March 11-20 from 2.085 million tonnes in the previous 10-day period.
The modest output drop, however, suggests many mills are still betting on demand picking up in April and May.
‘Mills don’t want to take the risk of missing any opportunity to make profits as it will take them about one month to resume output if they cut production,’ said another trader in Shanghai.
Price offers for imported iron ore cargoes in China were steady. Benchmark 62-percent grade iron ore was unchanged at $137.30 a tonne on Monday <.IO62-CNI=SI>, according to data provider Steel Index.
Rio is offering 165,000 tonnes of 61-percent grade Pilbara fines in a tender, traders said. Rio sold a cargo of the same grade at $135.80 a tonne last week, and a Singapore-based trader expects the latest shipment to be sold at around $135.
‘There are not many cargoes in the market so prices are unlikely to drop sharply,’ he said.
($1 = 6.2080 Chinese yuan)
(AGENCIES)
Follow our WhatsApp channel