SINGAPORE, Mar 25: Shanghai rebar futures retreated from a three-week peak on Wednesday, following gains inspired by anticipation that tighter environmental scrutiny in China would curb supply in a glut-hit market. Some traders also pared back expectations for a seasonal spike in Chinese steel demand amid a slowing economy. Iron ore futures in Dalian dropped for a fifth session in six. The most-traded October rebar contract on the Shanghai Futures Exchange was down 1.5 percent at 2,514 yuan ($405) a tonne by midday, after rising as high as 2,574 yuan on Tuesday.
China’s anti-pollution campaign has shut mills in the provinces of Shandong and top steel producer Hebei that have failed to comply with stricter environmental standards. ‘Even if this leads to production cuts, overall steel production in China is still much much more than demand. And if we don’t see a significant pickup in seasonal demand, prices will lose support,’ said a trader in Shanghai. Chinese steel demand typically gains pace after the Lunar New Year as warmer weather spurs construction activity. But analysts say any demand pickup may be limited with the economy forecast to grow this year at its slowest pace since 1990.
‘Weak fundamentals have once again weighed on prices as domestic steel demand fails to improve,’ ANZ Bank said in a note.
The September iron ore contract on the Dalian Commodity Exchange was down 0.7 percent at 436 yuan a tonne. Iron ore for immediate delivery to China’s Tianjin port jumped 2.6 percent to $55.60 a tonne on Tuesday, according to The Steel Index (TSI), a day after hitting $54.20, the lowest since TSI began compiling prices in October 2008. Amid tumbling prices, Australia’s Fortescue Metals Group chairman and company founder Andrew Forrest called on competitors to cap production, according to media reports. But the Australian Competition and Consumer Commission asked Forrest to explain his remarks, saying ‘any attempt by Australian businesses to encourage competitors to restrict outputs is a matter of grave concern’ to the competition body.
The world’s three biggest iron ore producers – Vale , Rio Tinto and BHP Billiton – have continued to expand output amid sliding prices, shipping more to China as smaller high-cost rivals faltered.
Fortescue, the No. 4 iron ore supplier, last week pulled a $2.5 billion bond offer.
(AGENCIES)
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