Shanghai steel futures fell to their lowest in two weeks on Tuesday, reflecting worries about demand prospects and excessive supply in top producer and consumer China, while iron ore rose on the first trading day after its week-long National Day break.
Steelmaking restrictions imposed under an anti-smog campaign ahead of the Chinese holidays may be loosened, which may prompt mills to ramp up production, boosting demand for raw material iron ore, analysts and traders said.
The most-traded construction steel rebar contract on the Shanghai Futures Exchange, for January 2020 delivery, ended down 2.3% at 3,404 yuan ($477.90) a tonne. It slumped 2.4% earlier in the session to its weakest since Sept. 23.
Hot-rolled steel coil, used in cars and home appliances, dropped 1.8% to 3,416 yuan a tonne.
Despite its bruising trade war with the United States, China’s steel output is forecast to grow about 7% this year, Westpac Institutional Bank said in its October market outlook, after churning out a record 928.26 million tonnes in 2018.
Steel sales in China, however, have softened as growth in the machinery sector slowed, while the offset from infrastructure has not been sufficient, Westpac analysts said.
“The Chinese administration clearly stated at the July Politburo economic meeting that property will not be used to boost growth this time so this significant part of steel demand is unlikely to come to the rescue in 2020,” they said.
Steel futures prices slumped despite plans by some Chinese steel mills to push prices higher in the coming days, according to a Shanghai-based trader.
“We have received several notices from mills saying they plan to adjust prices upwards in a move to test the market and gauge demand after the holidays,” the trader said.
FUNDAMENTALS
* The most-traded iron ore on the Dalian Commodity Exchange edged up 0.8% to 657 yuan a tonne, its highest since Sept. 18 this year.
* On the Singapore Exchange, the front-month November iron ore contract was up 0.6% at $89.12 a tonne in afternoon trade.
* Brazil’s iron ore exports in September fell to 27.14 million tonnes from 28.30 million tonnes in August and 33.90 million tonnes in September last year.
* Shipments to China from Australia’s Port Hedland terminal, the world’s biggest iron ore port, dropped more than 5% to 36.05 million tonnes in September from a month earlier.
* Morgan Stanley expects supply tightness in global iron ore market to ease next year.
* Spot iron ore benchmark SH-CCN-IRNOR62 settled at $94 a tonne before the holidays.
* China’s smog-prone northern city of Tangshan has issued new guidelines to punish and prosecute companies and individuals found guilty of pollution offences, amid warnings it might miss its air quality goals for this year.
* Dalian coking coal rose 1.4% to 1,260 yuan a tonne while coke edged down 0.2% to 1,880 yuan.
* Stainless steel was down 0.1% at 15,675 yuan a tonne.