Steel futures in China fell on Tuesday, with both rebar and iron ore retreating after rising for four sessions, as slowing economic growth in the world’s top ferrous metals consumer continued to cloud the demand outlook for these commodities.
China cut its GDP growth target for this year to 6.0 percent to 6.5 percent, as expected, from around 6.5 percent last year but offered more stimulus, including cuts in taxes and social security fees, increases in infrastructure investment and lending to small firms, to shore up its economy.
Whether the stimulus measures are enough to meet the revised growth target, which is a “wide” range, remains to be seen, said analyst Helen Lau at Argonaut Securities.
“The market is reacting to the headlines,” she said. “Iron ore prices had recently surged due to concerns over supply, but there is still uncertainty on the demand side.”
The most traded iron ore on the Dalian Commodity Exchange ended down 1.3 percent at 623 yuan ($92.96) a tonne, after falling as much as 3 percent earlier in the day.
Dalian iron ore hit a record-high 657.5 yuan in February in the aftermath of top miner Vale SA declaring force majeure on iron ore contracts after one of its tailings dams in Brazil collapsed in late January.
Iron ore prices are likely to “moderate” in March, said analyst Edward Meir of INTL FCStone.
“We do not see the supply disruptions lasting long as the Brazilian government has given no indications that it intends to come down hard on Vale,” he said.
He downplayed the impact of the Brazilian supply cutbacks, which he said are still “relatively small in the grand scheme of things, impacting roughtly 1 1/2 percent of world supply”.
Other steel-making raw materials were also lower, with Dalian coke ending down 2.5 percent at 2,087 yuan a tonne while coking coal fell 1.4 percent to 1,278.5 yuan.
The most-active construction steel rebar contract on the Shanghai Futures Exchange edged down 0.7 percent to 3,793 yuan a tonne. Hot rolled coil edged 0.8 percent lower at 3,777 yuan.
Yaang Pipe Industry Co., Limited (www.yaang.com)