Shanghai rebar futures fell to a one-week low on Monday following last week’s rally as investors felt the previous gains outpaced physical demand for steel in China, the world’s top producer
The October benchmark rebar contract on the Shanghai Futures Exchange tumbled as much as 4.7 percent to 2,396 yuan ($358) a tonne in early trade, its lowest since July 11. The contract was at 2,407 yuan by the midday break.
“Futures have surged too quickly last week, widening the gap between spot and promoting some mills and funds to take short positions,” said Bai Jing, an analyst with Galaxy Futures in Beijing.
Futures rose to more than 100 yuan a tonne higher than spot prices last Friday, so futures today were retreating to keep pace with the spot prices, said Bai.
“Record high output and a multi-year low of steel product inventories at some market warehouses suggested consumption still remained firm,” she said.
Despite the steady steel demand, some warned that the spike was close to an end in near-term as prices already factored in positive macro-economic data for June issued last week and were likely to ease off from high levels.
Prices climbed 4.6 percent last week driven by a mandated steel output cut in the key-producing region of Tangshan city between July 12-31 and the expectation of easing monetary policy amid better-than-expected macro-economic data.
Steelmaking raw materials followed rebar, a material used mainly for construction, lower in morning trade.
The most-active September iron ore futures on the Dalian Commodity Exchange dropped 2.9 percent to 445 yuan a tonne by midday. Coke fell 1.8 percent and coking coal dropped 1.6 percent.
China’s average daily crude steel output reached a record high of 2.316 million tonnes in June as firm demand spurred mills to produce more of the alloy.
Iron ore for immediate delivery to China’s Tianjin port <.IO62-CNI=SI> fell further by 20 cents to $57.80 a tonne last Friday, but it rose 4.7 percent last week, the fourth weekly gain in a row.