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Sputtering demand, glut deepen losses in China's steel, iron ore

Published 23/05/2016, 02:41 pm
© Reuters.  Sputtering demand, glut deepen losses in China's steel, iron ore
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* Past seasonal demand, increased supply of steel and iron ore

* Iron ore stocks at China's ports highest since March 2015

By Manolo Serapio Jr

MANILA, May 23 (Reuters) - Steel and iron ore futures in China sank to their lowest since March on Monday, each tumbling nearly 6 percent at one stage, as faltering steel demand in the world's top consumer put renewed pressure on oversupplied markets.

Steelmaking raw materials coking coal and coke slid 4 percent and other China-traded commodities also took a hit amid growing doubts about whether the world's second-largest economy is stabilising.

Chinese steel and iron ore futures have fallen 30 percent from their peaks in April. The price surge was fuelled by bets that the worst was over for the country's economy, leading to bloated prices and volumes on domestic commodity exchanges and prompting regulators to impose curbs to restore order.

Seasonal demand for steel has passed and the current weather, hot in some parts of China and rainy elsewhere, has slowed construction activity, said Kevin Bai, analyst at CRU consultancy in Beijing.

"Along with the increased steel production that we saw in response to the price increase this year, prices will be under pressure," said Bai.

Rebar, or reinforcing bar used in construction, fell as much as 5.7 percent to a session low of 1,936 yuan ($296) on the Shanghai Futures Exchange SRBcv1 , its weakest since March 7. It was down 5.3 percent at 1,946 yuan by midday.

On the Dalian Commodity Exchange, steelmaking raw material iron ore DCIOcv1 dropped as much as 5.8 percent to 350.50 yuan a tonne, its lowest since March 4. It was last down 5.4 percent at 352 yuan.

Stocks of imported iron ore at China's major ports rose 1.6 percent from the previous week to 100.45 million tonnes on May 20, according to data tracked by industry consultancy SteelHome. SH-TOT-IRONINV

It was the highest level since March 2015, and analysts warn of additional global supply this year.

"The market started a bit tighter, but it is going to ease. We've got the extra Vale iron ore coming in near the end of the year and better weather coming, adding to supply," said Peter O'Connor, analyst for Shaw and Partners in Sydney.

BHP Billiton (LON:BLT) BHP.AX , the world's third-largest iron ore miner after Rio Tinto (LON:RIO) RIO.AX and Vale VALE5.SA , sees about 30 million tonnes of new seaborne supply this year. economic growth in China should support its iron ore demand until the start of the next decade although there will be continued volatility in steel and iron ore prices in the short term, said Cláudio Alves, global director for marketing and sales at top iron ore miner Vale, at an industry conference last week. in China, Dalian coking coal DJMcv1 and coke DCJcv1 each fell 4.2 percent and Shanghai hot-rolled coil SHHCcv1 dropped 5.1 percent.

Shanghai rubber SNRcv1 fell 3.1 percent, Zhengzhou cotton CCFcv1 slipped 2.2 percent and Dalian egg DJDcv1 dropped nearly 2 percent.

($1 = 6.5450 Chinese yuan)

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