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PrintShanghai rebar fell to its lowest level in more than five months on Tuesday, stretching its losses into a third straight session, amid thin Chinese demand that could prompt producers in the world's biggest steel market to curb output.
Weakness across riskier assets, from oil to equities, also pressured rebar futures, which in turn has cut appetite for key raw material iron ore, dragging down spot prices to their lowest in about 2-1/2 months.
"Steel mills are facing a hard time with the extended fall in prices," said a Shanghai-based iron ore trader.
"Our sales are okay, but not at high prices, and steel mills are keeping inventories low and not planning to buy one tonne if they can."
The most briskly traded rebar contract for October delivery on the Shanghai Futures Exchange touched a session low of 4,055 yuan ($640) a tonne, last seen on Nov. 30, before closing at 4,090 yuan, down 1.1 percent.
"There's still too much steel for the current market to absorb. Given this sustained fall in prices, we should expect steel production to be cut down by the end of this month,"another trader in Shanghai said.
China, which makes around half of the world's steel, produced at a record daily pace of around 2 million tonnes in the past two months, based on industry estimates, in anticipation of a pickup in seasonal demand that turned out to be slow.
Falling in tandem with steel prices, benchmark iron ore with 62-percent iron content .IO62-CNI=SI dropped 0.7 percent on Monday to $136.70 a tonne, the lowest since Feb. 22, based on data from the Steel Index.
Spot deals this week showed a continued fall in prices, with miner Rio Tinto selling 75,000 tonnes of 65 percent grade iron ore concentrate at $147 a tonne, including freight, down from a prior sale price of $150, the second Shanghai trader said.
Top iron ore supplier Vale sold 80,000 tonnes of 64 percent grade iron ore fines at $138.32 a tonne, versus $139.05 for a similar grade previously, he said.
Vale is selling another cargo via a spot tender on Tuesday, 167,00 tonnes of 61-percent grade fines, traders said.
At China's iron ore trading platform, which debuted on May 8, Vale sold a 164,619-tonne cargo of 63.5-grade fines at $135 a tonne on Monday, down more than 3 percent from a benchmark price, according to the website of the China Beijing International Mining Exchange which runs the platform.
A second cargo, of 110,000 tonnes of Australian 62-grade fines, was sold at $139 a tonne, up $1 from a benchmark price, the exchange said.
"We don't see much bids for cargoes. I think the downtrend in both steel and iron ore prices will continue until the end of this month unless steel mills cut production," said the second trader.
A steep decline in prices for iron ore forward swaps <0#SGXIOS:> reflects investor expectations spot rates could fall further, with prices in backwardation or those for nearby delivery higher than for further forward months. （Source: Reuters）
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