Shanghai rebar hits record low due to housing woes, oversupply

2014-09-10

Shanghai rebar steel futures fell more than 1 percent to a record low on Tuesday, under pressure from a weak housing market in China and excess supply that have sliced nearly a quarter off prices this year.

Prices of rebar, a steel product used in construction, have been hitting record lows regularly since mid-August, prompting big Chinese mills to cut production late last month.

Rebar for January delivery on the Shanghai Futures Exchange dropped to 2,795 yuan ($456) a tonne, the weakest for the most active contract since the bourse launched the product in March 2009.

Spot steel prices in China have also been sliding, with billet falling as much as 50 yuan over the long holiday weekend to 2,390 yuan a tonne, according to a trader in Shanghai. Chinese markets were shut on Monday for the Mid-Autumn Festival.

“Construction demand is weak and people are expecting another tough period for real estate developers in September and October,” the trader said.

A deepening slowdown in China’s property sector has weighed on the economy, putting pressure on the government to roll out fresh stimulus measures to support growth.

Data on Monday showed China’s imports unexpectedly fell for the second straight month in August, posting the worst performance in over a year.

China’s big steelmakers slashed daily crude steel output by more than 8 percent from Aug. 21-31 from the previous 10-day period to 1.677 million tonnes, the lowest level since late March, according to data from the China Iron and Steel Association last week.

Prices of steelmaking raw material iron ore, also hit hard by growing global supply as top Australian and Brazilian miners lift output, could slip further towards $80 a tonne, said Mark Pervan, head of research at Australia and New Zealand Banking Group.

“There’s probably a bit more downside in the short term because this is like catching a falling knife. There hasn’t been any catalyst to change it,” said Pervan.

But after hitting $80, the price could bounce back towards $90-$95 during the fourth quarter as Chinese iron ore mines shut down for the winter, forcing mills to seek imported cargoes, he said.

Iron ore for immediate delivery to China .IO62-CNI=SI was unchanged at $83.60 a tonne on Monday, according to data compiled by Steel Index, with most Chinese participants away for the Mid-Autumn holiday.

That was the lowest since September 2009 and leaves iron ore with a year-to-date loss of nearly 38 percent. It fell 4.9 percent last week, its steepest drop since late May.

Iron ore futures in Singapore and China slipped further on Tuesday. The most traded January contract on the Dalian Commodity Exchange was off 0.2 percent at 588 yuan a tonne by midday. The October contract on the Singapore Exchange dropped half a percent to $83.52 per tonne.

Australian iron ore miner Western Desert Resources Ltd said on Monday it had called in administrators after failing to reach a deal with bankers over its debt.

China’s iron ore imports fell 9.3 percent in August from July to 74.88 million tonnes, government data showed on Monday.

Source from : Reuters

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