Steel and iron ore futures in China edged lower in morning trade on Thursday, with sentiment dampened by falling automobile sales and a softer outlook for economic growth in the world’s biggest consumer of commodities.
Hot-rolled coil, the steel used in cars and home appliances, slipped as much as 1.2% to 3,845 yuan ($560.36) a tonne on the Shanghai Futures Exchange.
China is likely to see vehicle sales drop again this year compared to expectations for zero growth, the country’s biggest auto industry association said on Wednesday, after its data showed the sector contracted for a 12th straight month in June.
The most-active October construction steel rebar contract also stretched losses, dropping as much as 1.3% to this week’s lowest at 3,974 yuan a tonne.
“Steel demand particularly in the construction sector has slowed down a bit as some real estate developers face financing issues at home,” said a Shanghai-based trader.
“But they are trying to solve this problem by trying to raise more funds at the overseas markets,” the trader added.
Chinese steel futures and prices for steelmaking inputs such as iron ore have risen this year partly due to expectations that Beijing will provide more stimulus to avoid a sharper economic slowdown.
The trader said he expected more stimulus after the National Day holiday in October. “Usually nothing big happens before that,” he added.
China’s economic growth is expected to slow to a near 30-year low of 6.2% this year, a Reuters poll showed on Wednesday, despite a flurry of support measures to spur domestic demand amid a bruising trade war with the United States.
* The most-traded September iron ore contract on the Dalian Commodity Exchange ended the morning session down 0.6% at 872 yuan a tonne.
* Benchmark spot 62% iron ore for delivery to China, SH-CCN-IRNOR62 was up 1.7% to $119.50 a tonne on Wednesday, edging closer to the more than five-year high of $126.50 hit on July 3, data compiled by SteelHome consultancy showed.
* “I think there’s still some support for iron ore on the demand side. The market looks stable,” the Shanghai-based trader said.
* Driven by demand for capesize vessels shipping iron ore, which indicates increased shipments of the steelmaking input from Brazil to China, the Baltic Exchange’s main sea freight index rose to its highest in more than five and a half years on Wednesday.
* Imported iron ore inventory at Chinese ports has fallen 18% this year in the wake of mine shutdowns in Brazil due to safety checks following a deadly dam disaster in January, and weather-related disruptions in supply from Australia. SH-TOT-IRONINV
* Other steelmaking inputs were largely unchanged, with Dalian coking coal up just 0.1% at 1,377 yuan a tonne and coke steady at 2,091 yuan.