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PrintShanghai steel futures hit a record low on Wednesday, exerting more pressure on prices of the raw material iron ore whose freefall has forced Chinese steel producers to skip contracted cargoes.
Chinese mills, the world's biggest iron ore buyers, have either cancelled or deferred shipments of up to 4 million tonnes this month after iron ore prices tumbled to their lowest in more than 2-1/2 years, the latest evidence of a slowdown in the world's top steel market.
Shanghai steel rebar futures, down nearly 14 percent this year, hit a record low of 3,555 yuan ($560) a tonne on Wednesday. It closed about 1 percent lower at 3,557 yuan, its eighth daily loss in a row.
"I don't feel good. I don't think iron ore prices will bottom out soon. As long as steel mills don't aggressively cut production, the market will not see a balance," said an iron ore trader in Shanghai.
There are still a few traders hoping to see iron ore prices rebound soon and started to buy some cargo.
"We are looking to buy some tonnes as iron ore prices may hit the bottom soon," said a trader in China's port city of Dalian.
However, many steel traders believed large-scale stockpiling either by steel mills or traders will not happen even if prices hit bottom as the high inventories sitting at ports and weak steel prices have darkened the prospects.
A Qingdao-based trader said iron ore inventories at the port had risen by 720,000 tonnes to 18.23 million tonnes at the start of this week from a week ago, reflecting thin appetite among mills.
Iron ore with 62 percent iron content .IO62-CNI=SI, the industry benchmark, fell 2.7 percent to $106.40 a tonne on Tuesday, its weakest since Dec. 16, 2009, based on data from the Steel Index.
Some potential buyers are so bearish about the outlook for prices that they seek discounts of between $10-$15 from index-based prices.
"It is very worrying. They are asking for far bigger reduction in prices when they try to inquire for material," said a Hong Kong-based trader.(Source: Reuters)
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