SINGAPORE, June 15 Shanghai steel futures dropped nearly 2
percent on Monday to their lowest since April amid slow demand
that has forced Chinese producers to curb output.
That
could pressure iron ore prices that have rallied over the past three
weeks due to limited availability of spot high-grade material. Stockpiles of
ore at China's ports have dropped to the least since November
2013.
The
most-traded rebar contract for October delivery on the Shanghai Futures
Exchange was down 1.4 percent at 2,288 yuan ($369) a tonne by 0304 GMT. It
fell earlier to as low as 2,281 yuan, its weakest since April 21.
The
most-active September iron ore contract on the Dalian Commodity
Exchange slipped 0.1 percent to 448.50 yuan a tonne. China's Baoshan Iron and Steel, the world's
No.
4 steel producer, has slashed prices for July bookings and Argonaut
Securities analyst Helen Lau said that reflects weak summer demand.
"It is expected that other steel companies may follow suit or have cut
deeper in order to gain market share," Lau said. "Looking ahead, steel production will
remain sluggish during the summer, and July steel price
cuts will dampen the incentive for production. Iron ore prices
will be under pressure over the short term," she said.
China's
crude steel output dropped 1.6 percent to 340 million tonnes in
January-May, government data showed on Friday. In the same
period last year, production was up nearly 3 percent.
A
slowing Chinese economy has hit industrial demand with steel consumption
continuing to shrink in the first quarter of this year after contracting in 2014
for the first time in more than three decades.
Still,
spot iron ore prices have risen nearly 6 percent this month, stretching
a rally last week to touch the highest since January. Gains were fuelled by a
sustained drop in stocks of the raw material at China's ports.
The
port inventories fell by another 1.8 million tonnes to 82 million tonnes as
of June 12, down for a ninth consecutive week, according to data tracked by
consultancy SteelHome. Stocks are have dropped by nearly a fifth
this year.
Iron
ore for immediate delivery to China's Tianjin port .IO62-CNI=SI slipped
0.6 percent to $65 a tonne on Friday, a day after hitting a near five-month
high, based on data compiled by The Steel Index.
Source: reuters