* Potential buyers waiting for further price declines
* Chinese markets shut on Thursday and Friday for holiday
By Manolo Serapio Jr
MANILA, Sept 14 Chinese steel futures dropped to
a seven-week low on Wednesday, extending this month's losses
amid weak demand and rising supply, with market participants
unimpressed by Beijing's efforts at curbing excess capacity.
Steel demand in China, the world's top consumer and
producer, typically increases in September and October as
construction activity resumes after a summer lull.
"Currently we are not seeing any significant demand pickup
to be honest in terms of steel-consuming sectors," said Kevin
Bai, an analyst in Beijing with CRU consultancy.
"With prices coming down there is more hesitation among
people to purchase."
The most-traded rebar on the Shanghai Futures Exchange
fell as far as 2,246 yuan ($337) a tonne, its lowest
since July 25. The construction steel product was down 0.5
percent at 2,260 yuan by 0309 GMT.
There was limited physical trading in China ahead of public
holidays on Thursday and Friday, traders said.
Investor sentiment has been dragged down by the
"deterioration in the futures market and people are quite
bearish," said Bai.
Rebar futures have fallen more than 6 percent so far in
September after gains in the past three months that were
supported by the efforts to curb steel capacity.
Market participants are realising, though, that there may
not be a material impact from the capacity cuts, which have
involved shutting steelmaking facilities that "have been
inactive for months or years," said Bai.
China has cut 47 percent of the 45 million tonnes in annual
steel capacity it pledged to remove this year while crude steel
output rose for a sixth straight month in August.
"In our opinion, the more impactful measures are likely to
be environmental inspections, which increasingly appear to be
the central government's favoured means of production
rationalization," Lee McMillan, analyst at Clarksons Platou
Securities, said in a report.
The more frequent environmental inspections done by Chinese
authorities this year have prompted mills to curb production or
shut plants for a certain period of time, analysts say.
Weaker steel futures weighed on raw material iron ore, with
the most-active January iron ore contract on the Dalian
Commodity Exchange down 0.6 percent at 392.50 yuan a
tonne. It touched a seven-week low of 388.50 yuan on Tuesday.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI
slid 2.3 percent to $56.20 a tonne on Tuesday, the lowest since
July 25, according to The Steel Index (TSI).
There were limited physical trades with the selloff in
futures markets driving price expectations "increasingly
bearish," TSI said.
($1 = 6.6705 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Tom Hogue)