China steel, iron ore futures slip further
Market remains cold as domestic demand fails to pick up despite seasonal expectations
Chinese steel rebar and iron ore futures both lost ground yesterday as traders worried about market prospects in coming months, with domestic demand still showing few signs of any seasonal improvement.
Steel mills and iron ore miners are gathering in the coastal city of Qingdao this week for their annual China conference. The event is usually an opportunity for traders to make deals, but pessimism is expected to dominate this year's proceedings.
"There has just been no pick-up in demand at all recently and the market is still very cold," said a sales manager with a steel mill based in the city of Tangshan in Hebei province. "Our sales volume so far this season is pretty much the same as it was in the summer off-season - there hasn't been any increase," he said.
Iron ore for January delivery on the Dalian Commodity Exchange sank 1.79 per cent to end the day at 383.5 yuan (HK$465.9) a tonne. The contract has fallen or finished flat in seven straight sessions. January rebar on the Shanghai Futures Exchange dropped 0.9 per cent to 1,891 yuan a tonne, its third session in negative territory.
Losses are mounting at many cash-strapped Chinese steel mills due to the low prices for their wares and they are desperate to cut costs, which is hurting demand for high-quality iron ore.
"Most steelmakers are not interested in increasing production rates and are instead seeking to cut costs by stretching their raw material inventories," said ANZ Bank.