Mon May 27, 2013
* China steel output down slightly in mid-May -CISA
* Outlook for steel demand dimmed by slow China economy
By Manolo Serapio Jr
SINGAPORE, May 27 (Reuters) - Chinese steel futures dropped more than 2 percent to their lowest in almost nine months on Monday, pressured by soft demand in the world's biggest steel consumer whose economic recovery may be at risk of stalling.
Data last week showing China's factory activity shrank for the first time in seven months in May has cast doubts on the already tepid recovery in the world's No. 2 economy, dimming the outlook for steel demand and consequently Chinese appetite for the raw material iron ore.
The most traded rebar contract for October delivery on the Shanghai Futures Exchange closed 2.1 percent lower at the day's low of 3,496 yuan ($570) a tonne, its weakest since Sept. 7, 2012.
Steel demand slowed further last week in some parts of China due to heavy rains ahead of the seasonally weak consumption period that usually starts in June, a Shanghai-based iron ore trader said.
"Mills are just not getting enough orders so their inventories keep building up. At some point they would need to cut output sharply otherwise they would be facing some cashflow problems."
China's daily crude steel output eased only slightly to 2.185 million tonnes in mid-May from a record pace of 2.193 million tonnes in the first 10 days of the month, industry data showed on Monday.
China's excess steel capacity is depressing prices more now than in recent years because the economy is growing at a slower pace than the double-digit clip over the past decade. Mills are also cautious about cutting production steeply as they need to keep their market share in a fragmented sector.
China's gross domestic product grew by a smaller-than-forecast 7.7 percent in the first quarter and analysts say recent weak data may keep growth under 8 percent in April-June.
If the decline in steel production is sustained, that could curb Chinese appetite for imported iron ore. Spot iron ore prices are already down by more than a fifth from this year's peak levels.
Benchmark 62 percent grade iron ore .IO62-CNI=SI last stood at $123.20 a tonne on Thursday, according to data provider Steel Index, just off the 2013 low of $123 reached earlier last week. The price hit a peak of $158.90 in February, a 16-month high.
There was no price assessment on Friday due to a public holiday in Singapore.
"In the past weeks, people were looking at $120 as the bottom price. But now it seems that a lot of people are looking at $110-$115. The sentiment's bearish," another Shanghai trader said.
"We have almost cleared all our stocks and we're not buying any cargo. We are quite pessimistic, we think the market will fall further."
($1 = 6.1316 Chinese yuan) (Editing by Muralikumar Anantharaman and Himani Sarkar)
* China steel output down slightly in mid-May -CISA
* Outlook for steel demand dimmed by slow China economy
By Manolo Serapio Jr
SINGAPORE, May 27 (Reuters) - Chinese steel futures dropped more than 2 percent to their lowest in almost nine months on Monday, pressured by soft demand in the world's biggest steel consumer whose economic recovery may be at risk of stalling.
Data last week showing China's factory activity shrank for the first time in seven months in May has cast doubts on the already tepid recovery in the world's No. 2 economy, dimming the outlook for steel demand and consequently Chinese appetite for the raw material iron ore.
The most traded rebar contract for October delivery on the Shanghai Futures Exchange closed 2.1 percent lower at the day's low of 3,496 yuan ($570) a tonne, its weakest since Sept. 7, 2012.
Steel demand slowed further last week in some parts of China due to heavy rains ahead of the seasonally weak consumption period that usually starts in June, a Shanghai-based iron ore trader said.
"Mills are just not getting enough orders so their inventories keep building up. At some point they would need to cut output sharply otherwise they would be facing some cashflow problems."
China's daily crude steel output eased only slightly to 2.185 million tonnes in mid-May from a record pace of 2.193 million tonnes in the first 10 days of the month, industry data showed on Monday.
China's excess steel capacity is depressing prices more now than in recent years because the economy is growing at a slower pace than the double-digit clip over the past decade. Mills are also cautious about cutting production steeply as they need to keep their market share in a fragmented sector.
China's gross domestic product grew by a smaller-than-forecast 7.7 percent in the first quarter and analysts say recent weak data may keep growth under 8 percent in April-June.
If the decline in steel production is sustained, that could curb Chinese appetite for imported iron ore. Spot iron ore prices are already down by more than a fifth from this year's peak levels.
Benchmark 62 percent grade iron ore .IO62-CNI=SI last stood at $123.20 a tonne on Thursday, according to data provider Steel Index, just off the 2013 low of $123 reached earlier last week. The price hit a peak of $158.90 in February, a 16-month high.
There was no price assessment on Friday due to a public holiday in Singapore.
"In the past weeks, people were looking at $120 as the bottom price. But now it seems that a lot of people are looking at $110-$115. The sentiment's bearish," another Shanghai trader said.
"We have almost cleared all our stocks and we're not buying any cargo. We are quite pessimistic, we think the market will fall further."
($1 = 6.1316 Chinese yuan) (Editing by Muralikumar Anantharaman and Himani Sarkar)
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