SINGAPORE, Aug 17 (Reuters) - Shanghai steel futures fell to record lows on Friday and are heading for their fifth weekly loss in six as slower demand in top steel market China dragged down prices, trapping iron ore at 2-1/2-year troughs.
Brazil’s Vale, the world’s biggest iron ore miner, said it expects prices to start rebounding next month as Chinese steel mills replenish stockpiles but traders said they were unsure, given that the sustained decline in prices since early July has failed to draw buyers back into the spot market.
“The market’s still depressed and more traders are trying to offload their material,” said an iron ore trader in Hong Kong."
“We are seeing more offers, but buyers are still scarce. People feel prices can still fall some more,” said another iron ore trader in Shanghai.
The most-traded rebar for January delivery on the Shanghai Futures Exchange fell as low as 3,614 yuan ($570) a tonne, before closing nearly 1 percent lower at 3,626 yuan.
Rebar, or reinforcing steel bar, used in construction, dropped 2.3 percent for the week and is on track to stretch its monthly losing streak to a fifth straight month in August.
Spot steel prices in China were falling as well. The price of billet in Tangshan in the country’s top steel producing Hebei province stood at 3,150 yuan per tonne on Thursday, down almost 3 percent from a week ago, traders said.
The price of steel rebar in southern China has dropped to about $616 a tonne from March 2 to Aug. 20, Commonwealth Bank of Australia said in a note.
While steel inventory there has also declined to 5.69 days’ worth of supply from 7.02 days, the bank said the decrease in stocks could suggest inventory destocking amid weak demand.
“We believe that weak demand conditions will persist in the short term in China,” CBA said, citing China’s manufacturing purchasing managers’ index data which remains subdued.
Steel demand in China, the world’s biggest consumer and producer, is slowing along with the economy which grew at its weakest pace in more than three years in the second quarter. Disappointing trade and industrial output data last week suggested the slowdown may have extended to July.
That is hitting China’s demand for iron ore. China is the top importer of the raw material and buys about two-thirds of the world’s output.
Iron ore with 62 percent iron content <.IO62-CNI=SI>, the industry benchmark, fell more than 1 percent to $111.90 a tonne on Thursday, its weakest since Dec. 24, 2009.
Down nearly 20 percent so far this year, the price of iron ore has dropped in 24 of the past 27 trading sessions.
Sale tenders by miners this week backed the case for a further decline in prices.
Vale on Thursday sold 165,000 tonnes of 64.56-percent grade Brazilian iron ore fines at $121.59 a tonne, including freight, down from the $123.10 at which it sold a similar 64.44-percent grade cargo earlier in the week, traders said.
Rio Tinto sold 61.5-percent grade Australian Pilbara iron ore fines at $113.21 per tonne, lower than a previous deal at $115.13, traders said.
Vale is selling around 95,000 tonnes of 63.1-percent grade iron ore via a tender closing later on Friday, traders said.