Jan. 25 (Bloomberg) -- Steel prices in China, the world’s biggest producer of the metal, dropped the most in four months last week as inventories piled up and concerns grew that the government may curb lending.
Inventories of steel products, including holdings by traders, producers and end users, are estimated to exceed 50 million metric tons, setting a record, said Ma Haitian, an analyst with Beijing Antaike Information Development Co. That’s compared with an estimated 18 million tons a year ago, he said.
“Some may trim their inventories at discounted prices to collect money before the Chinese New Year” holiday in February, Ma said. “Speculation of interest rate hikes and other tightening measures also added to concerns about capital availability in the market.”
China’s growth rate in the fourth quarter accelerated at the fastest pace since 2007, as the nation’s $586 billion stimulus spending and record lending stoked car and property sales. That’s raised concerns the government may increase interest rates or take other measures to curb inflation and limit asset bubbles.
Baoshan Iron & Steel Co., the nation’s largest steelmaker, fell 1.9 percent to 7.72 yuan at 11:29 a.m. in Shanghai trading. Angang Steel Co. fell 1.8 percent to HK$14.42 in Hong Kong.
Chinese prices of hot-rolled coil, a benchmark product, fell 2.2 percent last week, the biggest weekly decline since Sept. 25, according to Antaike. Prices have gained 16 percent since Oct. 15, the low of last year.
Iron Ore
The decline in steel prices has led a drop in the costs of iron ore, a steelmaking ingredient.
The cash price of 62-percent iron ore delivered to China fell 4 percent last week to $124.30 a metric ton, based on data from The Steel Index. Prices have dropped for two weeks after reaching $131.2 a ton on Jan. 8, a 13-month high.
Industries including housing, autos, shipbuilding and machinery will continue to grow fast, which will support steel demand this year, the China Iron and Steel Association said in a research report on Jan. 22.
The People’s Bank of China on Jan. 13 raised the proportion of deposits that banks must set aside as reserves by 50 basis points starting Jan. 18, increasing the likelihood of higher interest rates, according to economists.