SHANGHAI, Sept 16: Chinese steel futures fell for a fifth straight session today to a more than six-week low on weaker demand from end-users in the world’s top consumer during what is typically a brisk consumption period.
Steel demand usually peaks in China in September and October as construction activity picks up pace, and demand expectations were high given signs of a stabilising Chinese economy. But end-users may have been cautious and put restocking on hold, traders and analysts said.
‘Investors had high expectations that steel prices would rise in September as demand typically improves, but end users’ restocking turned out to be weaker than expected,’ said Jin Tao, an analyst with Guotai Junan Futures in Shanghai.
The most active rebar contract for January delivery on the Shanghai Futures Exchange touched a session low of 3,643 yuan ($600), its lowest level since Aug. 1. It was down 0.9 percent at 3,644 yuan by the midday break.
Rebar prices are down 5.3 percent since late August but by then they had rallied more than 12 percent from the year’s low levels hit in mid-June. That price jump has put off some prospective buyers, traders said.
‘We didn’t see any aggressive restocking by end users as they don’t want to accept the rallied prices,’ said a Shanghai-based steel trader.
However, some analysts say China’s steel demand should remain resilient amid signals that the world’s second-largest economy is on a better footing, which will support appetite for steelmaking raw material iron ore.
‘Our recent marketing trip to China confirmed a more buoyant steel story with solid demand in high-speed rail, subway, highway and real estate activity,’ ANZ Banking Group said in a research note on Friday.
Increased supplies from miners have weighed on spot iron ore prices, but persistently strong steel production in China suggests demand from mills for imports will continue.
‘The perceived glut in iron ore production has not eventuated, with the increased capacity being mopped up by record high levels of Chinese imports and steel output,’ ANZ said.
The bank said tight Chinese stockpiles would prevent iron ore prices from falling too steeply in the near term.
Benchmark spot iron ore with 62 percent grade <.IO62-CNI=SI> fell 0.5 percent to $134.50 a tonne on Friday, according to data from the Steel Index. It hit a one-month low of $134.10 on Sept. 6. Shanghai rebar futures and iron ore indexes at 0355 GMT
Contract Last Change Pct Change SHFE REBAR JAN4 3644 -32.00 -0.87 THE STEEL INDEX 62 PCT INDEX 134.5 -0.70 -0.52 METAL BULLETIN INDEX 136.44 -0.25 -0.18
Rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.1188 Chinese yuan) (AGENCIES)
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