Iron Ore-Shanghai rebar down; ore rises on high steel output

Thu Mar 29, 2012
SHANGHAI, March 29 (Reuters) - Shanghai steel futures extended losses on Thursday, falling to a two-week low as investors saw little evidence demand would be boosted further amid a slow seasonal recovery.

The most-traded October rebar contract on the Shanghai Futures Exchange fell to a low of 4,313 yuan ($680) a tonne on Thursday, its lowest since Mar.15. It had lost 0.58 percent to 4,320 yuan a tonne by the close.

"Steel prices have risen by over 200 yuan a tonne after the new year holiday, which was a relatively big rise, while demand isn't strong enough to support any further big gains in the near term," a Shanghai-based steel trader said.

China's daily crude steel output rose 1.1 percent to 1.919 million tonnes between March 11 and 20 over the prior period, as mills ramped up production in
expectation of improving demand in the world's largest consumer, with warmer weather encouraging construction activity.

Analysts remain wary that rapidly growing production could cap gains in steel prices, however, due to slower demand growth.

"Steel supply is rising rapidly, but we don't see much strength for demand to rise significantly in the near term, which will be likely to limit steel
price gains," said Hu Zhengwu, an analyst with industry consultancy Custeel.com.

"Investors saw little evidence for government policies to drive demand, and steel prices will find it difficult to climb a lot in the short term."

Still, Hu expected China's daily crude steel output to reach 1.95 million tonnes in March, versus daily production of 1.917 million tonnes a year earlier.

Iron ore prices continued rising to their highest in more than five months, as miners bet on strong steel production in China, the world's top buyer.

Iron ore with 62 percent iron content .IO62-CNI=SI climbed for a sixth day in seven on Wednesday, gaining 0.4 percent to $147.7 a tonne, a level last seen
on Oct.19, according to the Steel Index.

Brazilian miner Vale sees iron ore prices remaining above $120 a tonne in the next few years as demand in China remains strong despite slower annual growth.

Shanghai rebar futures and iron ore indexes at 0720 GMT

  Contract                          Last    Change  Pct Change              
  SHANGHAI REBAR*                   4320    -25.00       -0.58
  PLATTS 62 PCT INDEX             149.75      1.75        1.18
  THE STEEL INDEX 62 PCT INDEX     147.7      0.60        0.41
  METAL BULLETIN INDEX            147.05      0.07        0.05

  *In yuan/tonne                                                            
  #Index in dollars/tonne, show close for the previous trading day

  ($1 = 6.3060 Chinese yuan)  
  ($1 = 6.3060 Chinese yuan)  

(Reporting by Ruby Lian)