Reuters reported that China steel futures hit three week lows on their third straight day of decline recently reflecting investor caution as demand in the world biggest steel market remained weak, weighing on prices of raw material iron ore.
The losses in Shanghai rebar futures mirrored weakness in equities and some commodities amid doubts on whether a key European Union summit later this week will produce concrete measures to solve the euro zone 2-1/2-year old debt crisis.
The most active rebar contract for October delivery on the Shanghai Futures Exchange closed down 0.8% at CNY 4,076 a tonne, just off its session trough of CNY 4,074 and its lowest since June 5. After last week rise, spot offers for iron ore cargoes in top buyer China were steady on Tuesday a day after benchmark rates dropped.
Mr Rory MacDonald iron ore broker at Freight Investor Services said "Iron ore can only do so much by itself before it's constrained by ever narrowing steel margins, and by and large China steel isn't doing anything at the moment."
Mr MacDonald said "Traders have been buying more than have mills have, so obviously they will be sitting on inventories that they will want to move out, which could add to softening."
He said that "I don't see us breaking USD 140 this time around. Unless you see an improvement to end-user demand for steel in China then the likelihood of breaking USD 140 is very, very limited."
Chinese steel prices are down more than 2% this year as slower activity in the world's No. 2 economy curbs demand. Steel demand also tapers off during the summer months when construction projects slow down.
Benchmark iron ore with 62% iron content .IO62-CNI=SI dropped 0.2% to USD 137.10 a tonne on Monday, according to the Steel Index. Iron ore rose for 10 consecutive days up to Thursday, its longest winning streak since mid-November, as traders bet that high steel output in China will push mills back into the spot market to restock.
The last time iron ore was around USD 140 was in early May, before prices fell in tandem with Chinese steel as supply far outpaced demand.
Source - Reuters
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