Thu Aug 16, 2012
* China steel prices to remain weak as oversupply weighs-CISA
* Iron ore has fallen in 23 of the past 26 trading sessions
By Manolo Serapio Jr
SINGAPORE, Aug 16 (Reuters) - China steel futures dropped for a fourth day running on Thursday as an industry group warned excess supply could limit any chances of a recovery in prices going forward.
That means prices of raw material iron ore, which are hovering near their lowest in more than 2-1/2 years, may fall further as Chinese steel producers continue to curb output.
The most-traded rebar for January delivery on the Shanghai Futures Exchange dropped 0.1 percent to 3,665 yuan ($580) a tonne by 0533 GMT. The contract hit a record low of 3,631 yuan earlier this month.
China's steel prices are expected to remain weak in the next few months due to a supply glut that will offset an expected increase in demand, the China Iron and Steel Association said.
"I don't think there will be any recovery in steel demand for the rest of this year. The economy is so poor and steel production remains high," said an iron ore trader in Shanghai.
What would be a game changer, however, is if China's steel production drops by at least 10 percent or the government invests massively in infrastructure or housing, he said.
Steel producers in China are wary about cutting production too much for fear of losing their market share in a highly fragmented industry. Also, with the bulk of China's major steel mills owned by the state, most steelmakers keep their furnaces running to maintain employment.
In July, China's daily crude steel output slipped 0.8 percent from the previous month to 1.99 million tonnes.
Still, a darkening outlook for the economy will keep pressure on prices for iron ore and Chinese steel, which have fallen 24 percent and 16 percent, respectively, from their 2012 peaks.
A sharp drop in Chinese exports to the debt ravaged-European Union, Beijing's biggest overseas market, could exacerbate China's trade situation in the second half, according to a spokesman for the Commerce Ministry.
In the iron ore physical market, buying interest remained thin. Iron ore with 62 percent iron content .IO62-CNI=SI, the industry benchmark, slipped 0.2 percent to $113.10 a tonne on Wednesday, based on data from Steel Index.
That is not far off the low of $112.90 hit on Monday, its weakest since Dec. 29, 2009. The price of iron ore has fallen in 23 of the past 26 trading sessions.
"Interest for all cargoes is still very low. Before, mills were more interested in chasing after material with higher iron content. But now they are more concerned about the price," said another Shanghai-based trader.
With about 200,000 tonnes of iron ore at Chinese ports, the trader said his company only managed to sell about 5,000 tonnes last week, about a tenth of their usual sales before the recent rapid decline in prices.
Shanghai rebar futures and iron ore indexes at 0533 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3665 -4.00 -0.11
PLATTS 62 PCT INDEX 113.5 -0.50 -0.44
THE STEEL INDEX 62 PCT INDEX 113.1 -0.20 -0.18
METAL BULLETIN INDEX 113.24 -1.51 -1.32
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3625 Chinese yuan)
(Reporting by Manolo Serapio Jr.; editing by Miral Fahmy)
* China steel prices to remain weak as oversupply weighs-CISA
* Iron ore has fallen in 23 of the past 26 trading sessions
By Manolo Serapio Jr
SINGAPORE, Aug 16 (Reuters) - China steel futures dropped for a fourth day running on Thursday as an industry group warned excess supply could limit any chances of a recovery in prices going forward.
That means prices of raw material iron ore, which are hovering near their lowest in more than 2-1/2 years, may fall further as Chinese steel producers continue to curb output.
The most-traded rebar for January delivery on the Shanghai Futures Exchange dropped 0.1 percent to 3,665 yuan ($580) a tonne by 0533 GMT. The contract hit a record low of 3,631 yuan earlier this month.
China's steel prices are expected to remain weak in the next few months due to a supply glut that will offset an expected increase in demand, the China Iron and Steel Association said.
"I don't think there will be any recovery in steel demand for the rest of this year. The economy is so poor and steel production remains high," said an iron ore trader in Shanghai.
What would be a game changer, however, is if China's steel production drops by at least 10 percent or the government invests massively in infrastructure or housing, he said.
Steel producers in China are wary about cutting production too much for fear of losing their market share in a highly fragmented industry. Also, with the bulk of China's major steel mills owned by the state, most steelmakers keep their furnaces running to maintain employment.
In July, China's daily crude steel output slipped 0.8 percent from the previous month to 1.99 million tonnes.
Still, a darkening outlook for the economy will keep pressure on prices for iron ore and Chinese steel, which have fallen 24 percent and 16 percent, respectively, from their 2012 peaks.
A sharp drop in Chinese exports to the debt ravaged-European Union, Beijing's biggest overseas market, could exacerbate China's trade situation in the second half, according to a spokesman for the Commerce Ministry.
In the iron ore physical market, buying interest remained thin. Iron ore with 62 percent iron content .IO62-CNI=SI, the industry benchmark, slipped 0.2 percent to $113.10 a tonne on Wednesday, based on data from Steel Index.
That is not far off the low of $112.90 hit on Monday, its weakest since Dec. 29, 2009. The price of iron ore has fallen in 23 of the past 26 trading sessions.
"Interest for all cargoes is still very low. Before, mills were more interested in chasing after material with higher iron content. But now they are more concerned about the price," said another Shanghai-based trader.
With about 200,000 tonnes of iron ore at Chinese ports, the trader said his company only managed to sell about 5,000 tonnes last week, about a tenth of their usual sales before the recent rapid decline in prices.
Shanghai rebar futures and iron ore indexes at 0533 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3665 -4.00 -0.11
PLATTS 62 PCT INDEX 113.5 -0.50 -0.44
THE STEEL INDEX 62 PCT INDEX 113.1 -0.20 -0.18
METAL BULLETIN INDEX 113.24 -1.51 -1.32
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3625 Chinese yuan)
(Reporting by Manolo Serapio Jr.; editing by Miral Fahmy)
No comments:
Post a Comment