The most-traded rebar contract for May delivery on the Shanghai Futures Exchange touched a session low of 3,446 yuan ($570) a tonne, within striking distance of a record trough of 3,441 yuan reached on Jan. 10. It closed 0.4 percent lower at 3,451 yuan.
Iron ore for immediate delivery to China fell nearly 2 percent to $124.80 a tonne on Monday, its lowest since July 10, according to data compiled by the Steel Index. The price dropped 2.6 percent last week, its second consecutive weekly fall. Declining steel prices suggest further downside risks for iron ore in the current quarter, Australia and New Zealand Banking Group said.
At the Dalian Commodity Exchange, the most-active May iron ore contract slumped 2.3 percent to settle at 847 yuan per tonne, after falling to 843 yuan earlier, its weakest since the contract was introduced on Oct. 18.
China’s economy grew 7.7 percent in the fourth quarter from a year earlier, the National Bureau of Statistics said Sunday in Beijing. The median estimate in a Bloomberg News survey of 44 analysts was for a 7.6 percent gain. “Better-than-expected GDP helped rebar pare some losses, but lower production costs are still putting pressure on the market,” said Wu Zhili, an analyst at Shenhua Futures Co. in Shenzhen. “Iron ore and coal markets remain in a bear trend.”
Tighter access to loans and slow steel demand are keeping Chinese steel producers from replenishing iron ore inventories ahead of the week-long Lunar New Year break as they have done in past years.
Restocking demand sent spot iron ore prices to near 2013 highs close to $160 a tonne in January last year, ahead of the holiday in February. “We are far and away from any restocking this year,” said an iron ore trader in Singapore. “The market is pretty depressed, the reason being the tight credit situation in China and high port stock inventory.”
This is now feeding through to iron ore prices, which fell only 7% last year compared with heftier declines for industrial commodities like coking coal and nickel, down 17% and 19% respectively. Until recently, traders had bet that China’s heavy spending on subways, bridges and other infrastructure would keep demand for the steel-making commodity high.
Steel production in China, which buys three in every five tons of iron ore sold by sea, has been slowing since September, partly in response to a push by the country’s leaders to cut the industry’s bloated capacity and environmental pollution. Several furnaces have been shut down on government orders in the northern province of Hebei, which churns out roughly a quarter of the nation’s steel.
China is opting for a more sustainable consumption-driven economic growth after 30 years of double-digit expansion spurred by investment. Helen Lau, senior analyst at UOB-Kay Hian Securities in Hong Kong said she expects a seasonal rebound in steel prices after a week-long Lunar New Year break that starts on Jan. 31, but adds that any restocking by traders is unlikely to be aggressive. “China‘s lack of liquidity and negative Beijing growth messages continue to weigh on investor sentiment and, until we see a change in messaging, we do not expect to see any steel or iron ore restocking despite the overwhelming likelihood that March construction numbers should be stronger,” Standard Bank analyst Melinda Moore said in a note. Overcapacity in the steel sector in China which has kept the market mostly in surplus of the alloy has also weighed on prices.
- Rebar in Shanghai Drops as Iron Ore, Coke Prices Slump – Bloomberg
- Shanghai rebar near record low; China data clouds outlook – Reuters
- Shanghai rebar hits record low on poor demand, Dalian iron ore sinks – Business Recorder
- China steel wrap: Most prices down on futures slump, de-stocking pressure – Metal Bulletin