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Steel futures drop after recent rally, but outlook upbeat

Chinese steel futures edged lower on Monday after recent sharp gains that pushed the metal to a six-month high last week, but a firm outlook for demand limited price losses.
China’s daily crude steel output averaged 2.53 million tons between May 10 and May 20, Argonaut Securities analyst Helen Lau said in a note. That compares with the April daily average of 2.56 million tons, which was the highest since at least May 2014.
“The rising steel production is driven by strong underlying demand,” Lau said.
The most actively traded rebar for October delivery on the Shanghai Futures Exchange was down 0.8 percent at 3,770 yuan ($588) a ton. The construction steel product touched 3,869 yuan on Thursday, its strongest level since early December 2017.
Underlining firm consumption in China, the world’s top steel consumer, rebar stocks among Chinese traders had fallen nearly 50 percent from mid-March to 5.04 million tons as of June 8, data tracked by SteelHome consultancy showed.
China’s robust steel consumption and production had pushed up the country’s imports of raw material iron ore by 13.5 percent from April to 94.14 million tons last month.
“This likely reflects strong profitability of Chinese steel mills,” Barclays analysts said.
Stocks of iron ore at China’s major ports slipped marginally to 161.03 million tons on Friday from a record 161.98 million tons the previous week, SteelHome data showed.
Spot iron ore for delivery to Qingdao port in East China’s Shandong Province rose 0.9 percent to $67.44 a ton on Friday, a three-week high, according to Metal Bulletin.
On Monday, the most-traded September iron ore on the Dalian Commodity Exchange was up 0.2 percent at 468 yuan a ton.
Source: Reuters
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