Reuters reported that Shanghai steel futures dropped for a second day on Monday as demand in the world's top steel consumer remained tepid, although Beijing may come up with more steps to revive growth after consumer and producer prices eased more than expected.

The most traded rebar contract for October delivery on the Shanghai Futures Exchange fell more than 1% to a near one week low of CNY 4,042 per tonne. By the close, it stood at CNY 4,050.

An iron ore trader in Beijing said The steel market will have upward momentum given that Beijing cut interest rates last week and may take more measures to support growth. But it will take time and forces driving up steel prices will still be weak.

China's annual consumer inflation slowed to a 29 month low of 2.2% in June, while producer prices eased even faster to a 31 month trough. The data signaled falling demand for goods in the world's No 2 economy and the likelihood Beijing would do more to support growth, such as cutting interest rates further.

Falling producer prices show that end-user demand for China's factory output particularly from overseas customers is declining as the global economy weakens, providing more room for Beijing to tweak monetary and fiscal policy to boost the economy. But the seasonal slowdown in construction activity due to hot summer weather could offset support from efforts to revive economic growth, with steel prices unlikely to get a boost until August.

Source - Reuters

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