Chinese steel futures dropped on Wednesday, snapping a five-day winning streak and dragging down raw material iron ore, amid a still shaky outlook for demand in the world’s top consumer. The decline pulled back both commodities from a near one-month high hit in the previous session. The most-active rebar on the Shanghai Futures Exchange was down 0.9 percent at 3,104 yuan ($450) a tonne, as of 0239 GMT. The construction steel product hit 3,160 yuan on Tuesday, its strongest since April 6.
Rebar fell for a second straight month in April as pickup in demand was slower than expected, traders said. While construction demand remained firm as Chinese stockpiles steadily dropped, the growth in supply appeared stronger. China’s crude steel production reached a record 72 million tonnes in March. As of April 28, rebar stocks held by Chinese traders stood at 5.42 million tonnes, the lowest since January, according to data compiled by SteelHome.
Iron ore on the Dalian Commodity Exchange slipped 1.2 percent to 524.50 yuan per tonne. In the previous session, it touched 539 yuan, its highest since April 7.The sharp swings in iron ore prices have caused buying interest in China to slow down, said a Shanghai-based trader.”Mills’ opinion towards buying keeps changing. Weeks ago, when the price was high they tend to buy cargo. Now that the price is dropping again, some mills are holding back, thinking it will fall further,” he said.
There is more interest in iron ore stocks sold at Chinese ports that tend to be cheaper than fresh seaborne cargoes, the trader said. Inventory of imported iron ore at China’s major ports reached 130.55 million tonnes as of Friday, up 950,000 tonnes from the previous week, SteelHome said. The stockpiles hit 132.45 million tonnes in March, the most since SteelHome began tracking it in 2004.
Iron ore for delivery to China’s Qingdao port was little changed at $68.72 a tonne on Tuesday, according to Metal Bulletin. The spot benchmark, which touched a 30-month peak of $94.86 in February, has dropped 13 percent this year.The fall in steel futures also weighed on coal used in steelmaking. Dalian coking coal slipped 2.7 percent to 1,104 yuan a tonne, and coke slid 3.6 percent to 1,574 yuan.