China steel, iron ore futures hit contract lows on weak demand

China steel, iron ore futures hit contract lows on weak demand

SANGHAI: Chinese rebar futures fell for the fourth straight session on Monday to hit a contract low on tepid demand in the world’s top steel consumer, also pushing raw material iron ore to a record low.

Construction activity in China is not expected to pick up until the end of March, hitting demand for steel and forcing Chinese steel mills to have scheduled maintenance to curb output and inventories.

“About 40 percent of steel inventories at major markets is owned by steel mills apart from those at their own plants, suggesting mills are facing unprecedented pressure,” said Xu Huimin, an analyst at Huatai Great Wall Futures in Shanghai.

The most-traded October rebar contract on the Shanghai Futures Exchange fell to a low of 2,462 yuan ($393), its weakest since the contract was launched in 2009. It was TRADING 1.2 percent lower at 2,479 yuan by midday and has lost 8.2 percent so far this year.

Steel demand is expected to pick up when the weather gets warmer, but given high ore stockpiles at major ports in China, weak fundamentals will continue to weigh on iron ore prices, the China Iron and Steel Association said in a report on Friday.

Iron ore futures for September delivery on the Dalian Commodity Exchange hit a low of 449 yuan a tonne, their lowest since the contract was launched in 2013. They were then trading unchanged at 451 yuan, and have fallen 11.2 percent so far this year.

The closure of some steel mills in China’s eastern Shandong province last week after failing to meet stricter environmental standards has raised fears of a wider crackdown.

“The crackdown on steel mills in Linyi signals the government’s determination on curbing heavy smog, but I don’t think the government will take out a ‘one-size-fits-all’ policy now,” Xu said.

China’s iron ore imports declined for the second straight month in February, down 13.5 percent to 67.94 million tonnes from January, but rose 11 percent from a year ago, customs data showed.

Benchmark 62 percent grade iron ore for immediate delivery to China declined 1.9 percent to $58.20 a tonne on Friday, its lowest since the index was published, according to the Steel Index. It has fallen 18.3 percent so far this year.

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