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China steel prices sag further on slow demand, drag down raw materials
[MANILA] China's rebar steel futures dropped for a second straight session on Thursday as demand in the world's top consumer slows over winter along with construction activity, although multi-year low stockpiles capped losses.
Prices fell even as fresh data showed China's steel output declined to a nine-month low in November because of state-ordered production curbs aimed at limiting pollution.
Given freezing weather, "construction activities may gradually slow further in the northern part of China, so there's less demand for construction steel," said Richard Lu, analyst at CRU consultancy in Beijing.
Some property developers may also be slowing purchases as they pay back loans with the year-end approaching, he said.
The most-active rebar contract for May delivery on the Shanghai Futures Exchange was down 0.9 per cent at 3,812 yuan (S$778.24) a tonne by the midday break, after initially hitting a one-week low of 3,802 yuan.
The construction steel product, up almost 10 per cent in November, hit a three-month high last week as China's output curbs thinned stockpiles to the lowest in years.
Inventory of rebar at Chinese traders stood at 2.85 million tonnes on Dec 8, the lowest since at least December, 2011, according to SteelHome consultancy.
China's average daily crude steel output fell to 2.205 million tonnes in November from 2.334 million tonnes in October, based on government data released on Thursday. It was the lowest level since February.
Despite tighter stockpiles, some end-users are reluctant to buy more steel, said CRU's Lu. "Buyers were hesitant to place orders because they said prices are currently too high for them," he said.
The weakness in steel prices pulled down raw materials iron ore and coking coal.
The most-traded May iron ore on the Dalian Commodity Exchange slipped 0.7 per cent to 497.50 yuan a tonne, while coking coal fell 2.8 per cent to 1,249 yuan. Coke dropped 3.5 per cent to 2,012 yuan.
Iron ore for delivery to China's Qingdao port slid one per cent to US$70.54 a tonne on Wednesday, according to Metal Bulletin, below a three-month high of US$72.68 reached on Dec 4.
"We think China's iron ore market remains saturated with both domestic and import sources. Therefore, iron ore prices should continue to be under pressure," Argonaut Securities analyst Helen Lau said in a note.