SINGAPORE, Aug 1: Shanghai steel futures edged up on Thursday, backed by data showing manufacturing activity in China unexpectedly picked up in July, but the modest gains reflect a tentative outlook for steel demand in the world’s top consumer.
A rise in new orders lifted China’s official Purchasing Managers’ Index to 50.3 in July from 50.1 in June, beating estimates for a fall below 50 and offering a sign that the second-largest economy could regain its footing.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange gained 0.4 percent to 3,655 yuan ($600) a tonne by the midday break, after falling to a three-week trough of 3,613 yuan on Wednesday.
The prospect of weak demand for steel in the second-half of the year, however, is still hanging over the market.
‘I think we’re seeing less demand for steel than what we’ve seen in the past few weeks. That’s definitely reflecting on iron ore since prices at port stocks have been falling,’ said an iron ore trader in Shanghai.
The price of 58-percent grade Australian Yandi iron ore fines stockpiled at major Chinese ports has dropped to $115 a tonne, although the same grade is still being offered at between $119-$120 in the spot seaborne market, he said.
‘The fall in port prices means that end-users are not as willing to pay a premium to take on cargo as they were 10 days back,’ the trader said.
Benchmark 62-percent grade iron ore <.IO62-CNI=SI> eased 0.8 percent to $129.90 a tonne on Wednesday, the lowest since July 16, according to data provider Steel Index.
Iron ore, China’s top commodity import by volume, still ended July with a gain of 11.5 percent, its biggest monthly increase since December 2012.
Firmer Chinese steel prices as end-users and traders restocked helped iron ore rally last month, although the outlook ahead remains hazy.
China’s steel demand will likely remain weak for the rest of the year, the country’s industry group said on Wednesday, after reporting that its members – 86 steel mills – incurred a combined loss of 669 million yuan in June.
(AGENCIES)
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