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China steel futures fall most in seven years as rout extends

Published 10/05/2016, 03:34 pm
Updated 10/05/2016, 03:40 pm
© Reuters.  China steel futures fall most in seven years as rout extends

* Rebar drops as much as 7.6 pct, widening losses

* Iron ore in Dalian down around 5 pct

* Steel supply seen rising while demand has weakened

By Manolo Serapio Jr

MANILA, May 10 (Reuters) - Chinese rebar steel futures posted their biggest intraday decline since March 2009 on Tuesday on concerns rising supply could overwhelm thin demand, pushing more money out of markets bloated last month by buying on hopes of recovering demand.

Iron ore fell as much as 6 percent during morning trading and the most-active contracts for both futures were down about 5 percent at midday and other commodities faltered.

Retail buyers had poured into funds that rushed into China's commodities futures in April, hoping a stabilising economy would boost demand for raw materials, lifting prices and volumes of everything from steel to cotton.

Exchanges in Dalian, Shanghai and Zhengzhou have since imposed curbs to rein in speculative activity including higher transaction fees. The Dalian exchange on Monday said it would continue to strengthen its market monitoring and may raise transaction fees further to curb speculation risks. measures along with an increase in steel supply, particularly of rebar used in construction, have helped fuel a big retreat in futures prices, said Qing Dong Qing, analyst at Shanghai Zhong Cai Futures.

"The short positions of hedge funds and futures investment funds have also suppressed ferrous metals," said Qing.

The most-traded rebar on the Shanghai Futures Exchange SRBcv1 fell as much as 7.6 percent to 2,085 yuan ($320) a tonne, its weakest since March 18 and the biggest percentage drop since March 30, 2009. It was down 5.3 percent at 2,137 yuan by midday.

Rebar, which led the mid-April rally that unnerved global investors, has dropped almost 17 percent this month after gaining a record 21 percent in April.

"Buying interest has shrunk so those steel traders who have bought cargo for speculation must now feel the pain with actual demand just so-so," said a Shanghai-based trader.

China's crude steel output hit a record high of 70.65 million tonnes in March and analysts and traders expect production to have remained strong in April as a rally in steel prices spurred mills to lift output. The April data will be released later this month.

The weakness in steel has spilled over to raw materials used to make it. On the Dalian Commodity Exchange, the most-active iron ore DCIOcv1 was down 4.8 percent at 384 yuan a tonne after hitting a session low of 379.50 yuan, its lowest since April 11. It fell as much as 5.95 percent earlier in the session.

Dalian coke DCJcv1 fell 4.6 percent to 924 yuan.

Other commodities traded in Chinese platforms also dropped, with Shanghai nickel SNIcv1 down nearly 2 percent and tin SSNcv1 off 3 percent.

($1 = 6.5178 Chinese yuan)

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