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China steel outlook drags on raw materials futures
[SYDNEY] Concerns that China is producing too much steel put pressure on industrial raw materials markets on Monday, with key futures indicators, iron ore, coke and rebar all trading lower.
"We saw steel output up 6 per cent in January and February already, and the expectation is that demand will not be able to absorb all that," Commonwealth Bank of Australia analyst Vivek Dhar said. "There is simply too much steel out there, we're seeing iron ore fall as a result of that," Mr Dhar said.
The most-active rebar on the Shanghai Futures Exchange was down 1.47 per cent at 3,013 yuan (S$613) a tonne by midday.
Rebar's retreat swept iron ore lower, with the contract for September delivery on the Dalian Commodity Exchange down 2.7 per cent to 520 yuan a tonne.
Stocks of imported iron ore at China's port stood at 131.2 million tonnes as of Friday, according to SteelHome. That is more than one-tenth of China's estimated imports of iron ore this year, according to Australia's Department of Industry, Innovation and Science. "The market sees china needing less iron ore. This combined with increasing domestic production is putting pressure on the price," Mr Dhar said.
Dalian coking coal was also weaker, down 1.8 per cent to 1,274 yuan, while coke - made from coking coal - slid 1.5 per cent to 1,818 yuan.