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CORRECTED-China steel, iron ore futures near record lows on demand view

(Reuters) - Chinese steel and iron ore
futures fell on Tuesday to near the lowest levels for
most-active contracts on worries over slow demand for steel in
the world's top consumer that has prompted big producers to curb
output.
    Steel consumption is seasonally weaker in China during the
summer months that start from June as construction activity
thins, extending a slow period for the steel sector that began
last month.
    Output of larger Chinese mills has dropped since mid-May,
hitting 1.767 million tonnes of crude steel a day in the last 11
days of the month, based on estimates from the China Iron and
Steel Association. In mid-April, output of all Chinese mills
stood at 2.28 million tonnes. 
    Traders in China have been running down their steel
inventories over the past 14 weeks, with their stocks of five
major steel products slipping to 13.91 million tonnes last week
from 14.12 million tonnes in the previous week, data from
industry consultancy Mysteel showed.
    "Steel prices may continue to be near historical lows for an
extended period," said Zhou Ting, analyst at Jinrui Futures in
Shenzhen, noting that construction activity in southern China
was slowing down due to the hot weather.
    The most-active rebar for delivery in October on the
Shanghai Futures Exchange touched a session low of
3,043 yuan ($490) a tonne, near the weakest level of 3,034 yuan
for a most-traded contract reached last week. It was down 0.6
percent at 3,049 yuan by 0259 GMT.
    At the Dalian Commodity Exchange, iron ore for September
delivery slipped 0.7 percent to 683 yuan a tonne. It
fell to 680 yuan earlier, also not far off last week's 675 yuan
which was its lowest since the bourse launched the product in
October.
    Slower steel output would curb demand for raw material iron
ore from Chinese mills. The country's iron ore imports fell to
77.4 million tonnes in May from 83.4 million tonnes in April
which was the second highest monthly volume. 
    But reducing steel output may trim excess market supply and
help support prices going forward, said a trader in Shanghai.
"That could eventually boost iron ore buying interest from
mills," he added.  
    Iron ore futures in Singapore were largely steady with the
July contract on the Singapore Exchange little changed
at $94.26 a tonne in early deals.
    Benchmark ore with 62 percent iron content for immediate
delivery to China .IO62-CNI=SI slipped 0.2 percent to $94.30 a
tonne on Monday, according to Steel Index which compiles the
data.
    The benchmark price has stayed below $100 for three weeks
now, but has found some support since hitting a low of $91.80 on
May 30, its cheapest since September 2012.
    "We believe that most Chinese traders consider prices below
$100/tonne to represent good value and are likely to increase
purchases now that the fall in prices has been arrested,"
Citigroup analyst Ivan Szpakowski said in a report on Tuesday.
    "Moreover, while iron ore inventories at mills are not
particularly low, steel mills are likely to at least slow the
pace of destocking, with even such a modest step representing an
improvement in spot market demand." 
    Szpakowski said while prices should be more stable in the
second half of the year, he remains bearish in the medium term
with average price forecasts of $90 for 2015 and $80 for 2016.  
  Shanghai rebar futures and iron ore indexes at 0259 GMT
                                                                                           
  Contract                          Last    Change   Pct Change
  SHFE REBAR OCT4                   3049    -19.00        -0.62
  DALIAN IRON ORE DCE DCIO SEP4      683     -5.00        -0.73
  SGX IRON ORE FUTURES JULY        94.26     +0.07        +0.07
  THE STEEL INDEX 62 PCT INDEX      94.3     -0.20        -0.21
  METAL BULLETIN INDEX             94.46     +0.19        +0.20
                                                                                           
                                                                                           
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.2326 Chinese Yuan Renminbi)
  www.yaang.com

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