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Chinese steel, iron ore futures dip on demand concerns

Chinese steel and iron ore futures fell on Wednesday, pressured by concerns over weak demand in the country’s southern region where the rainy season is about to kick off.

The most-active construction steel rebar contract on the Shanghai Futures Exchange closed 1.2 percent lower to 3,730 yuan ($554.89) a tonne.

Hot-rolled coil, a manufacturing-grade steel product, slid 0.9 percent to 3,679 yuan a tonne.

“Trading on the spot market is getting tepid … with increasing rainfall in southern China, demand from downstream sectors is starting to show signs of weakening,” said analysts from CITIC Futures in a note in Mandarin.

Construction activity in southern regions typically slows down from May due to continuous rains and high temperatures.

Analysts also warned of rising output in the coming weeks amid easier production restrictions in the top steelmaking city of Tangshan, which could add to downward pressure on prices. The market expects tighter restrictions from next month.

Utilization rates at steel mills in China reached 70.03 percent last week as of April 19, the highest level since July 20, 2018, data compiled by Mysteel consultancy showed.

Prices of the most-traded iron ore futures on the Dalian Commodity Exchange also fell on Wednesday, slipping 1.6 percent to 619 yuan a tonne.

Steel mills in Tangshan are still under a temporary second-level smog alert, which requires at least a 40 percent operational restriction on sintering machines. The alert is due to be lifted on Thursday.

Coking coal prices rose 1 percent to 1,350 yuan a tonne, buoyed by concerns over tight supply in the coal-mining heartland of Shaanxi and Inner Mongolia, where local authorities are carrying out safety inspections at coal mines.

The coke contract for September delivery edged up 0.3 percent to 2,047 yuan a tonne.

Source: Reuters

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