China's steel and iron ore futures fell on Thursday as US plans to impose a higher 25 per cent tariff on $200 billion worth of Chinese imports renewed worries over an escalating trade war between the world's two biggest economies.
US Trade Representative Robert Lighthizer said President Donald Trump directed the increase from a previously proposed 10 per cent duty because China has refused to meet US demands and has imposed retaliatory tariffs on US goods.
Beijing said it would hit back if the United States takes further steps hindering trade, including applying the higher tariff rate.
The most active October rebar contract on the Shanghai Futures Exchange was down 1.8 per cent at 4,111 yuan ($603) a tonne by 0206 GMT.
The construction steel product touched a 5-1/2-year peak of 4,243 yuan on Wednesday following a weeks-long rally fueled by supply restrictions in China as its anti-pollution campaign intensifies.
"As long as tariffs are allowed to metastasize, they do have the potential to do real damage to the global growth story," INTL FCStone commodity consultant Edward Meir said in a report, referring to the US-China tariff war.
"What that means for commodities ... is that price rallies do not have a real chance of taking root."
Prices of steelmaking raw materials iron ore and coking coal also slid. The most-traded September iron ore on the Dalian Commodity Exchange fell 1.5 per cent to 473.50 yuan per tonne and coking coal lost 1.2 per cent to 1,177.50 yuan.
Coke, the processed form of coking coal, dropped 0.7 per cent to 2,282 yuan a tonne.
Spot iron ore for delivery to China's Qingdao port fell 2.4 per cent to $66.55 a tonne on Wednesday, according to Metal Bulletin.
The US-China trade tensions aside, traders say the continuing smog war in China which has prompted cities to either shut or cut output of industrial plants, including steel mills, would keep steel supply tight, supporting prices.
Average daily steel output by members of industry group China Iron and Steel Association stood at 1.96 million tonnes on July 11-20, down 19,200 tonnes from the first 10 days of July, the group said on its website this week.
Source: Economic Times