Thu Sep 20, 2012
* China manufacturing activity shrinks for 11th month
* Shanghai equities at lowest since 2009, other commods down
* Iron ore steadies after hitting one-month high
By Ruby Lian and Manolo Serapio Jr
SHANGHAI/SINGAPORE, Sept 20 (Reuters) - Shanghai steel futures fell more than 4 percent on Thursday in their biggest single day drop ever, after data showing an 11th month of contraction in China's manufacturing activity clouded the outlook for steel demand in the world's top market.
Shanghai rebar tracked losses in equities, which closed at their weakest since early 2009, with other commodities dragged down by uncertainty whether China will join other countries in providing more stimulus to spur its economy.
Without more stimulus, analysts say steel demand in the world's biggest consumer is unlikely to pick up strongly, keeping prices of raw material iron ore under pressure.
An index measuring manufacturing activity in China stood at 47.8 in September after hitting a nine-month low of 47.6 in August, even though output dipped to its lowest level in 10 months, a survey by HSBC of factory managers showed.
The data did not calm concerns that China's steel sector may struggle further before seeing a sustained recovery.
The most-traded rebar contract for January delivery fell to a session low of 3,478 yuan ($550) per tonne, before closing at 3,483 yuan, down 4.3 percent.
It was the steepest daily fall for rebar since Shanghai launched rebar futures in 2009.
Before Thursday's rout, rebar prices had recovered more than 13 percent from record lows hit this month, fuelled by hopes that Beijing's approval of more than $150 billion in infrastructure projects would revive steel demand.
"Steel demand hasn't improved at all. When prices started to rise, some end-users, who kept their stockpiles at low levels, did some restocking, but when traders tried to raise prices, end-users became reluctant to buy," said Zhang Yikun, a futures trader with Shanghai Chaos Investment Group.
The weakness in steel has translated into slower orders for spot iron ore cargoes.
"Prices went up too high too fast, and replenishment activity is easing," said a Hong Kong-based iron ore trader, who hadn't seen any transactions in the physical market on Thursday afternoon.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI was little changed at $109.50 a tonne on Wednesday, just off the previous day's one-month high of $109.60, according to data provider Steel Index.
Slower demand from China, the world's biggest iron ore importer, dragged down spot prices to $86.70 a tonne on Sept. 5, the lowest since October 2009.
But the infrastructure approvals helped prices bounce back above $100, although traders say the outlook remains shaky.
"Iron ore transactions have slowed down since yesterday. I think prices may not fall before the end of September, but the outlook is uncertain after the national holiday," said a Shanghai-based trader.
Chinese markets will be shut for a week next month for the National Day holiday.
Only a fresh round of government spending could turn China's steel sector around, as well as cement and aluminium smelting, said Mirae Asset Securities.
"When a new round of government spending starts, these sectors are likely to see a rally. However, it will be difficult to improve margins due to excessive supplies," Mirae Asset said in a note.
Shanghai rebar futures and iron ore indexes at 0759 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3483 -155.00 -4.26
PLATTS 62 PCT INDEX 114 +3.00 +2.70
THE STEEL INDEX 62 PCT INDEX 109.5 -0.10 -0.09
METAL BULLETIN INDEX 112.7 +2.53 +2.30
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3093 Chinese yuan)
* China manufacturing activity shrinks for 11th month
* Shanghai equities at lowest since 2009, other commods down
* Iron ore steadies after hitting one-month high
By Ruby Lian and Manolo Serapio Jr
SHANGHAI/SINGAPORE, Sept 20 (Reuters) - Shanghai steel futures fell more than 4 percent on Thursday in their biggest single day drop ever, after data showing an 11th month of contraction in China's manufacturing activity clouded the outlook for steel demand in the world's top market.
Shanghai rebar tracked losses in equities, which closed at their weakest since early 2009, with other commodities dragged down by uncertainty whether China will join other countries in providing more stimulus to spur its economy.
Without more stimulus, analysts say steel demand in the world's biggest consumer is unlikely to pick up strongly, keeping prices of raw material iron ore under pressure.
An index measuring manufacturing activity in China stood at 47.8 in September after hitting a nine-month low of 47.6 in August, even though output dipped to its lowest level in 10 months, a survey by HSBC of factory managers showed.
The data did not calm concerns that China's steel sector may struggle further before seeing a sustained recovery.
The most-traded rebar contract for January delivery fell to a session low of 3,478 yuan ($550) per tonne, before closing at 3,483 yuan, down 4.3 percent.
It was the steepest daily fall for rebar since Shanghai launched rebar futures in 2009.
Before Thursday's rout, rebar prices had recovered more than 13 percent from record lows hit this month, fuelled by hopes that Beijing's approval of more than $150 billion in infrastructure projects would revive steel demand.
"Steel demand hasn't improved at all. When prices started to rise, some end-users, who kept their stockpiles at low levels, did some restocking, but when traders tried to raise prices, end-users became reluctant to buy," said Zhang Yikun, a futures trader with Shanghai Chaos Investment Group.
The weakness in steel has translated into slower orders for spot iron ore cargoes.
"Prices went up too high too fast, and replenishment activity is easing," said a Hong Kong-based iron ore trader, who hadn't seen any transactions in the physical market on Thursday afternoon.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI was little changed at $109.50 a tonne on Wednesday, just off the previous day's one-month high of $109.60, according to data provider Steel Index.
Slower demand from China, the world's biggest iron ore importer, dragged down spot prices to $86.70 a tonne on Sept. 5, the lowest since October 2009.
But the infrastructure approvals helped prices bounce back above $100, although traders say the outlook remains shaky.
"Iron ore transactions have slowed down since yesterday. I think prices may not fall before the end of September, but the outlook is uncertain after the national holiday," said a Shanghai-based trader.
Chinese markets will be shut for a week next month for the National Day holiday.
Only a fresh round of government spending could turn China's steel sector around, as well as cement and aluminium smelting, said Mirae Asset Securities.
"When a new round of government spending starts, these sectors are likely to see a rally. However, it will be difficult to improve margins due to excessive supplies," Mirae Asset said in a note.
Shanghai rebar futures and iron ore indexes at 0759 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3483 -155.00 -4.26
PLATTS 62 PCT INDEX 114 +3.00 +2.70
THE STEEL INDEX 62 PCT INDEX 109.5 -0.10 -0.09
METAL BULLETIN INDEX 112.7 +2.53 +2.30
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3093 Chinese yuan)
No comments:
Post a Comment