Shanghai rebar futures fell to a record low on Wednesday as the bearish mood in China’s steel market continued after a week-long holiday, putting pressure on a recovery in iron ore prices.
A sluggish property sector and a slowdown in China’s overall economy had weakened steel demand in the world’s top consumer of the alloy, with domestic consumption shrinking this year.
Growth in China’s services sector weakened in September as new business cooled, a private survey showed, adding to signs of slower growth in the world’s No. 2 economy that could prompt more stimulus measures.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange closed down 1.3 percent at 2,513 yuan ($409) a tonne, after falling to 2,507 yuan earlier. That intraday trough was the lowest for a most-active contract since the bourse launched rebar futures in 2009.
China does not plan to expand steel exports significantly, and shipments next year will fall, Chi Jingdong, deputy secretary general of the China Iron and Steel Association, said on Monday, leaving limited opportunity for domestic steelmakers facing slow business at home.
The weakness in rebar helped wipe out gains in iron ore futures traded on the Dalian Commodity Exchange, with the January contract ending 0.2 percent lower at 547 yuan, after climbing as much as 3.8 percent earlier.
Spot iron ore prices recovered during the Oct. 1-7 National Day holiday in China as foreign traders bet on Chinese steel mills replenishing stockpiles when they return, traders said.
“I don’t think the mills would be drawn to take more cargoes. It would have been better for them to buy before the holiday when prices were lower,” said an iron ore trader in Shanghai.
Iron ore for immediate delivery to China rose 1.4 percent to $80 a tonne on Tuesday, the highest since Sept. 19, according to data compiled by The Steel Index.
There was a flurry of deals on the Singapore-based globalORE platform over the past week, with Australian cargoes sold at higher prices, helping the benchmark index bounce back from a five-year low of $77.50 reached on Sept. 30.
Still, iron ore ended September with a loss of almost 12 percent, its steepest monthly fall since May.
Iron ore futures traded on the Singapore Exchange also slipped on Wednesday, with the November contract down 2.2 percent at $77.51 per tonne.
INTL FCStone sees support for iron ore at $75 in October and resistance at $86.
“With no significant Chinese stimulus rescue expected this time, collapsing steel prices will likely continue to pressure iron ore,” INTL FCStone analysts said in a monthly market overview.
In the face of falling global prices, Indian iron ore miner Sesa Sterlite said there was an “urgent need” to scrap a 30 percent tax on exports of the raw material. Sesa owns the biggest mines in India’s western Goa state where a 19-month mining ban was lifted earlier this year.
Source: Reuters
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