Rebar steel futures in China dropped to new all-time lows on Tuesday, showing no respite for prices pressured by expectations a cooling property sector would continue to hurt demand.
Chinese iron ore futures also pulled back for a second straight session to the lowest in two months.
The most-active rebar for January delivery on the Shanghai Futures Exchange dropped earlier in the session to 3,003 yuan ($489) a tonne, the lowest for a most-traded contract since the bourse launched futures in rebar, a steel product used in construction, in March 2009. The contract closed down 0.1 percent at 3,015 yuan.
The construction sector, comprising real estate and infrastructure, accounts for around half of China's steel demand.
The weak property sector is now among the biggest risks to China's economy with data released on Monday showing home prices in China fell in July for a third straight month. That followed data last week that pointed to slower growth in property investment in July.
"What is quite disheartening is that even if many Chinese cities have already eased their property purchase policies, there's no sign of a recovery yet," said Helen Lau, analyst at UOB-Kay Hian Securities in Hong Kong.
Of greater concern for the steel sector is the slowdown in real estate investment, she said.
"That means demand from the property sector will be very slow and this will affect demand for steel and steel prices," said Lau who sees rebar potentially dropping another 30-50 yuan before finding support.
Iron ore also slipped. The January iron ore contract on the Dalian Commodity Exchange fell as far as 649 yuan per tonne, its weakest since June 20. It ended 0.3 percent lower at 654 yuan.
RESTOCK
But demand for iron ore cargoes in the spot market appears firm, traders said, with the benchmark spot price largely steady above $90 a tonne.
Iron ore for immediate delivery to China .IO62-CNI=SI was off 10 cents at $93.30 a tonne on Monday, according to data compiled by Steel Index.
"Expectations are steel mills will need to restock this week and the next after staying largely absent from the seaborne market last week," Australia and New Zealand Bank analysts said in a note.
Spot iron ore fell below $100 a tonne on May 19 and touched a 21-month trough of $89 in June, but has since been trading above $90.
Australian steelmaker and iron ore miner Arrium Ltd said it expects China's iron ore demand to remain strong due to brisk steel production and lower output from higher cost Chinese iron ore miners.
Arrium posted an 83 percent jump in annual underlying profit as its iron ore output rose by more than half.
BHP Billiton , the world's No. 3 iron ore producer, reported an 8 percent rise in second-half underlying attributable profit and said it will spin off assets from aluminium to nickel as it focuses on core businesses including iron ore.
Source: Reuters
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