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PrintChina steel futures steadied after falling to their weakest in seven weeks on Wednesday, as sluggish demand in the world's top steel consumer kept prices under pressure, dragging iron ore to its lowest in nearly a month.
Spot steel prices were also slipping amid a slow drawdown in inventories, with stockpiles of key steel products in China falling at around half of last year's pace. Offer prices for imported ore in China fell for a second straight day.
The most active rebar contract for October delivery on the Shanghai Futures Exchange hit a session low of 4,251 yuan ($670) a tonne, its weakest since March 7, before closing little changed for the day at 4,274 yuan.
"This is being driven by slow demand for steel," said a Shanghai-based iron ore trader." There's too much supply in the market but demand is increasing at a far lower rate than people had expected."
Since peaking at 19 million tonnes in mid-February, China's inventory of five major steel products -- rebar, wire rod, hot rolled coil, cold rolled coil and plate -- dropped 10 percent over nine weeks to 17.1 million tonnes on April 20, according to data compiled by Bank of America-Merrill Lynch.
Stockpiles of those products fell 19 percent over nine weeks after reaching last year's peak, based on the data, which cited figures from China's customs, National Bureau of Statistics and industry consultancies.
That is raising concern in the market particularly because China's steel production surged to a record pace of 2.03 million tonnes a day on average in the first 10 days of April, according to estimates last week by industry group the China Iron and
Steel Association.
HESITANT
Steel mills were producing at a rapid clip, hoping demand would pick up, as it has in previous years, during the seasonally strong second quarter. But China's economy is slowing this year, with first-quarter growth the weakest in almost three years, and with it consumer demand.
Prices of steel in China's spot market have been dropping since mid-April, with steel billet in the key Tangshan area in Hebei province down to 3,740 yuan a tonne on Tuesday, from 3,820 yuan on April 13, said the Shanghai trader.
With its fate linked to steel, iron ore prices similarly fell, with the benchmark 62-percent grade .IO62-CNI=SI dropping almost 1 percent to $146.70 a tonne on Tuesday, a level unseen since March 26, based on data from Steel Index.
"Because steel prices are dropping, mills are getting very hesitant to take any new cargo," said a trader in Singapore.
Offer prices for imported iron ore in China fell between $1-$2 a tonne on Wednesday, according to industry consultancy Umetal.
Top miner Vale sold a cargo of 63.99-percent grade iron ore fines at $151 a tonne, cost and freight, at a tender that closed late on Tuesday, traders said.
The price was quite low versus Vale's previous sale of 64.4-percent grade material at $157, said the Shanghai trader.
Brazil's Vale is likely to report that first-quarter net profit fell by nearly half from a year earlier due to lower prices for its main products, heavy rains which cut shipments and spending on new mines, analysts said in a Reuters poll.
Earlier this week, Rio Tinto sold a 62.5-percent grade South African iron ore concentrate at $142.10 a tonne, traders said.
Iron ore prices could fall further, with Chinese mills unlikely to take any action before a long weekend holiday. Chinese markets are shut on Monday and Tuesday for the Labour Day break.
"I think mills will prefer to wait until after the holiday to see where the market's headed," said the Singapore trader.（Source: Reuters）
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