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China iron ore, steel bounce off 3-mth lows; sentiment stays weak

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Iron ore and steel futures in China recovered from three-month lows to finish higher on Monday, but overall market sentiment remains fragile as supply picks up and seasonal demand wanes.

[MANILA] Iron ore and steel futures in China recovered from three-month lows to finish higher on Monday, but overall market sentiment remains fragile as supply picks up and seasonal demand wanes.

Both commodities are set to end May with their biggest monthly drop on record, as April's rally shifted to a rout after investors pared down optimism toward China's economy.

"The overall market sentiment remains weak as supply is rising while demand slows down seasonally," said Yu Yang, an analyst with Shenyin Wanguo Futures in Shanghai.

The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange closed up 0.2 per cent at 1,990 yuan (S$417) a tonne. It fell to as low as 1,894 yuan, its weakest level since March 4.

Rebar, or reinforcing bar, has fallen more than 20 per cent so far this month, the most since the contract was launched in 2009.

A fall in inventories of rebar held by Chinese traders after three weeks of increase and a cut in steel production in the country's key Tangshan area could lend temporary support to prices, said Yu.

China's top steelmaking city of Tangshan has ordered mills in and near the area to cut production for five days from Friday to ease air pollution.

On the Dalian Commodity Exchange, the most-active iron ore gained 0.9 per cent to end at 347.50 yuan a tonne, having dropped to 333 yuan earlier, its weakest since Feb 29. The contract has dropped 24 per cent so far in May, on track for its steepest monthly decline since it was introduced in 2013.

Steelmaking raw materials coking coal and coke rose 1.6 per cent and 1.2 per cent, respectively.

Elsewhere in China, agricultural commodities outperformed as investors tracked gains in overseas markets from cotton to corn. Dalian corn climbed 4 per cent and Dalian soymeal rose 3.7 per cent.

On the Zhengzhou Commodity Exchange, cotton rose 2.2 per cent and rapeseed meal jumped by the 5 per cent maximum allowed by the bourse.

REUTERS