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China's steel futures dip on uncertain demand outlook
[MANILA] Chinese steel futures fell on Thursday, with the benchmark rebar contract extending its decline for a third day, weighed down by the still-clouded outlook on demand in the world's top consumer of ferrous metals.
Market participants also worried about the impact of steel output curbs in the top steelmaking city of Tangshan on demand for steel-making ingredients, as iron ore prices also eased in early trade.
The most-active rebar contract on the Shanghai Futures Exchange fell as much as 1.2 per cent to 3,734 yuan (US$556.67) a tonne, the lowest level so far this month.
Hot rolled coil lost 1 per cent to hit 3,709 yuan a tonne.
"It's a reflection of the 'weak-demand, high-output' situation (in the Chinese market)," said analyst Richard Lu of CRU in Beijing.
But construction activities in China are likely to increase later this month, which may spur a rebound in steel prices, he said, citing March as the peak season for steel demand.
The most-traded iron ore contract on the Dalian Commodity Exchange dropped 1.4 per cent to 610.5 yuan a tonne.
Other steel-making raw materials were also lower, with coking coal down 1.3 per cent at 1,259 yuan a tonne and coke dipping 1.0 per cent to 2,055 yuan.
"Investors weigh the impact of extensions to steel mill output restrictions as heavy pollution remains prevalent in key production hubs," said John Meyer, an analyst at London-based broking and corporate finance firm S.P. Angel.
China's top steelmaking city of Tangshan has extended a level 1 smog alert that was due to be lifted on Wednesday as unfavourable weather conditions persist.
The level 1 alert, the highest in China's four-tier pollution warning system, has been in place since March 1 and requires steel mills to curb output by 40 per cent to 70 per cent or even stop production, depending on the scale of their emissions.
Tangshan did not set a new date for the lifting of the alert.
China will also extend winter anti-smog measures such as production cuts and traffic restrictions for a third successive winter, the environment ministry said on Wednesday.
(US$1 = 6.7078 Chinese yuan)